Airline cos in a sweet spot; 18% passenger growth sustainable: Experts
The airline stocks have been doing well in a goldilocks like scenario. To discuss the dynamics of the industry as well as potential of a new player coming into the private listed space – Air India. CNBC-TV18 spoke to Amber Dubey, Partner & Head of Aerospace & Defense, KPMG and Mayur Milak, Senior Research Analyst, Indianivesh Securities. Dubey is confident that the 18 percent passenger growth for the sector is very much sustainable because it is backed by some solid fundamentals. The oil prices look like they will be stagnant at the levels sub USD 50/barrel, the policy initiatives taken by the government have aided growth, the propensity to travel by air, higher per capita incomes and the economy growing at steady place – all these fundamentals will support growth of the airline sector. However, on the flipside the airline space is vulnerable to security, safety issues and health issues like a disease outbreak where the bookings get cancelled, says Dubey. The only headwind for the aviation sector is the infrastructure gap at main airports like Mumbai, Delhi and others like Goa, Pune etc but on the whole the current environment is conducive for growth. Talking about the privatisation of Air India, Milak says that would help bring in lot of efficiencies to the carrier. However, it is unlikely to be a neck-breaking competition to the other private players. In fact it would be good for the whole of aviation space. Therefore, the entire sector looks in a sweet spot, believe Milak, adding that it is supported by lower crude price, the demand looks structural and not seasonal. So, the overall growth looks intact and valuations are still cheap. There is still value in SpiceJet. Dexter Manley Jersey
33 destinations to have air integration soon
About 33 destinations (unserved airports) throughout the country will be connected by air services by this September-end, Union Civil Aviation Minister Ashok Gajapathi Raju has informed on Wednesday. Five operators would operate on 128 routes connecting 70 airports, most of which are not well connected by airlines at present. “Five airlines will be participating in the first phase and we will see (air) connectivity by this September-end,” Gajapathi Raju said. These 33 destinations would be connected under the Udan scheme, Gajapathi Raju who earlier participated in the International Day of Yoga at SBOA School here, said. Noting that Salem airport in Tamil Nadu is inoperative, the Minister said it is for the state government and airline operators to decide on providing regional connectivity. Over 45 unserved and under-served airports are expected to be connected under the scheme – UDAN (Ude Desh ka Aam Naagrik) that aims to make flying more affordable. In the first round of bidding, Air Odisha Aviation has won the bid to connect the maximum number of unserved airports in the country. Other carriers which won the bids to fly to unserved airports in tier-2 cities include Air India’s subsidiary Alliance Air, Air Deccan, SpiceJet, Air Odisha and Turbo Megha. About 50 per cent of seats on every flight will cost Rs 2,500 per seat under the Udan scheme. This will be applicable for flights where the distance is less than 500 km or one-hour. Dennis Seidenberg Jersey
At least 3 airlines eyeing stake in Air India
At least three aviation companies, besides the Tata group, have shown an interest in acquiring a stake in the beleaguered national carrier Air India. Sources close to the airline said that initial meetings had taken place with possible buyers, including the Tata group. “After Finance Minister Arun Jaitley’s interview to Doordarshan News in the last week of May saying the government is open to privatising the airline, three or four possible buyers – including the Tatas – have met with both the Finance Ministry and the Ministry of Civil Aviation,” the source said. BusinessLine could not independently confirm the names of the other suitors, and is therefore not disclosing their details, but among them are at least two international airlines. “Nothing definite have emerged from these talks yet,” the source added. “Within the government itself, there are differing views about privatising Air India. We’ll have to wait for the Cabinet meeting next week to see which way the government wants to go.” While Air India has a 105-strong fleet strength and deep international networks, it comes with aircraft-related debt of ?20,000 crore and another ?32,000 crore of working capital debt. The airline is now running on a ?30,000-crore bailout package extended by the UPA government in 2012. The NDA government’s policy think-tank NITI Aayog had recommended privatisation of the airline. If the Tatas were to buy the national carrier, this will be second time the group would be owning the airline. The business house and the airline have a shared history. The carrier was started as Tata Airlines in 1932 by former Tata Sons chairman JRD Tata, which was renamed Air India in 1946 and later nationalised in 1953. While Tata Sons declined to comment on the possibility of it buying Air India wholly or partially, aviation experts say it would only exercise this option with its current joint venture partner in India for Vistara, Singapore Airlines. “Domestically, both Air India and Vistara operate in the premium economy segments,” a person aware of Singapore Airlines’ business said. “So it wouldn’t make sense for the Tatas to acquire Air India and then compete with Vistara in the same market.” Morgan Moses Authentic Jersey
How history will come full circle if Tatas buy Air India
If Tata Group buys a controlling stake in beleaguered national carrier Air India, as indicated by an ET Now report, the history will come full circle. The airline will go back to a group which had built and nurtured it into one of the world’s finest airlines until grasping and sloppy governments run it into the ground. The Tata’s purchase will also tell the cautionary tale of how unbridled socialism that thrived on rampant corruption stymied private enterprise in India. It will underline a lesson India has learnt the hard way—the government has no business to be in business. Tata Sons set up Tata Airlines in 1932. JRD Tata, the legendary entrepreneur, himself flew the first flight between Karachi and Mumbai. In 1946, Tata Airlines became a public company and was renamed Air India. In 1953, when the government nationalised Air India “through the back door”, as Tata himself put it, it was one of the best airlines in the world. A dream enterprise of Tata, he had built it bit by bit with personal care, down to the menu and curtains. Tata was devastated when he came to know about the decision of then prime minister Jawaharlal Nehru, a Fabian socialist averse to private enterprise. Tata wrote to Nehru: “I can only deplore that so vital a step should have been taken without giving us a proper hearing.” “Even more than the decision itself, I was upset by the manner in which nationalisation was introduced through the back door without any prior consultation of any kind with the industry,” Tata wrote to a company executive about the nationalisation of his dream project. “However, we have to reconcile ourselves to the fact that we are living in a political and bureaucratic age in which people like ourselves no longer count for much in the scheme of things.” Yet, Tata accepted to become the nationalised airline’s chairman when Nehru insisted. Air India kept on doing well under him till he was removed in 1977 by then prime minister Morarji Desai. What Nehru once told Tata came to be prophetic for a large number of public sector units (PSUs)—especially Air India. During a conversation, Nehru rebuked Tata, telling him he hated the mention of the word “profit”. When Tata pointed out he was talking about the need of PSUs to make a profit, Nehru said, “Never talk to me about the word profit; it is a dirty word.” Living up to Nehru’s sentiment, Air India today reels under a debt of about Rs 50,000 crore and has never made a profit in a decade, despite eating up Rs 24,000 crore of a government bailout package. Even Tatas are concerned now over its huge debt. While there is no certainty if Tatas can turn Air India around if they decide to buy a controlling stake, the purchase will certainly write the concluding chapter of India’s socialist economic experiment—how an ideology kept pulling back a country where business runs in people’s blood. Jerry Hughes Jersey
RCS traffic to be 4 lakh-plus passengers during FY18: ICRA
Ratings agency ICRA on Wednesday estimated that passenger traffic generated from the central government’s ambitious regional air connectivity scheme UDAN would be around 4.43 lakh passengers only during FY2018. According to a study conducted by ICRA, UDAN’s impact would be marginal at 0.4 per cent of total passenger traffic during the year. The report pointed out that the majority of the RCS routes are expected to operate only for six-to-nine months during FY2018 as per the current schedule. “Once the routes are operational for full year, the traffic contribution is expected to be 0.6 per cent (6.94 lakh passengers). Even with optimistic assumptions for PLFs (passenger load factors) as well as number of flights on RCS routes, the contribution of RCS passenger traffic remains modest at 0.7 per cent during the fiscal,” the study said. The government announced the UDAN scheme in October 2016 with the key objective to facilitate balanced and affordable regional air connectivity through fiscal support and regional infrastructure development. In March 2017, five airlines were selected to operate a total of 128 routes connecting 65 distinct destinations and 45 RCS airports under phase-I of the scheme. “The full potential of phase-I will be realised in FY2019 when the impact of RCS on overall industry is expected to increase. Further, the expected phase-II auction would add to the RCS traffic,” said Anand Kulkarni, Assistant Vice President and Associate Head – Corporate Ratings, ICRA. “We expect the contribution of RCS traffic to overall industry to increase to 1.5-1.8 per cent during FY2019. However, issues like possible delays in matters like air operator permit (AOPs) issuance, readiness of airports, availability of adequate crew and presence of safety mechanisms could cause variations in estimates.” Kyle Fuller Authentic Jersey
AAI ropes in Tata Elxsi to design IT guidelines for airports
Design services provider Tata Elxsi has been roped in by the Airports Authority of India (AAI) to design information and technology guidelines for all upcoming AAI airports. Tata Elxsi will help AAI set up a team and create a process to design and implement customer-centric information and wayfinding system, which will cover the entire passenger journey, right from parking to boarding the plane, the company said in a statement today. Tata Elxsi Chief Designer, Service Design, Narendra Ghate said prior experience on redefining passenger experience for some leading airports in India gave Tata Elxsi an edge to bag the mandate. AAI Member Planning Sudhir Raheja said the authority was looking out globally for a company that can understand what people in India need and found that Tata Elxsi can help AAI in setting guidelines for all future airports at par with global standards. Tata Elxsi has already commenced work across airports, including Goa, Kolkata, Varanasi and Lucknow. The other short-listed airports are Chennai, Bhubaneswar, Pune, Trivandrum, Coimbatore and Guwahati. Jeff Skinner Jersey
High court dismisses PIL, paves way for Greenfield Airport
Itanagar: In a major relief which may pave way for construction of the Greenfield Airport at Hollongi, the Gauhati High Court Itanagar Permanent Bench has dismissed the PIL filed in 2015. While disposing off the case, the court directed the Papum Pare Deputy Commissioner, “To ensure that compensation that is payable on account of acquisition of land, is done upon due and proper verification of the claims of the genuine land owners and as per rates permissible under law.” The Court also noted the government advocate’s submission that proposed land at Hollongi has already been deserved by the government and therefore question of it coming under forest reserve does not arise. The government advocate also made it clear that Chakma families are not being paid compensation and are only being rehabilitated. Recently, the state Cabinet also decided to accept the recommendation of technical committee constituted by the Ministry of Civil Aviation, which selected Hollongi as permanent site for construction of a Greenfield Airport. However, the Cabinet put the condition that Hollongi will be selected subject to outcome of PIL filed by Tadar Takio. Stefon Diggs Authentic Jersey
Mahindra Aerospace’s Airvan 10 achieves type certificate
Australia’s first 10 seat Single Engine Turbine aircraft, the AIRVAN 10, has been awarded its FAR 23 Type Certificate from the Australian Civil Aviation Safety Authority, which was followed, by the US Type Certificate being issued by the Federal Aviation Administration. S P Shukla, chairman, Mahindra Aerospace, and Group president-Aerospace & Defence, Mahindra Group, commented, “This (certification) comes as a cornerstone for civil aviation. This certification under stringent safety standards in place today, aligns with Mahindra Group’s focus on introducing world class products in fast changing general aviation world which will be dominated significantly by turboprobs in this class of aircraft. It enhances our global reach further with specific focus on large markets for regional connectivity such as India, USA and Africa.” “This not only allows us to expand our existing markets but also provides much needed boost to regional low cost connectivity to those areas in the world where AvGas is a constraint. Our focus on engineering and in world class execution is the key to this milestone, said Arvind Mehra, executive director & CEO of Mahindra Aerospace. Keith Douglas, CEO of GippsAero said, “For our Australia and India teams, this is a much deserved recognition. This now gives us an opportunity to progress into the next stage of the programme which will address customer and region specific enhancements to the aircraft. We expect delivery of the first aircraft to identified customers by the early 2018. There has been a significant demand for such aircraft in expanding general aviation turboprop market and we are confident we will fill the gap by providing this cost effective solution.” Ameer Abdullah Jersey
Gov’t shelves private bids for new airports
Manila: The government has put on hold unsolicited proposals for new airports to serve Manila as it focuses on measures that can be undertaken immediately to address congestion at the country’s main international gateway. Manuel Antonio Tamayo, undersecretary for aviation at the Department of Transportation (DOTr), told reporters the National Economic and Development Authority has decided to defer the unsolicited proposals submitted by All Asia Resources Reclamation Corp. (ARRC) and San Miguel Corp. (SMC) for a new airport. “It’s still there. It’s still being considered. But it’s not immediate. It’s more of medium term. What we need now is the short term. We need to immediately decongest Manila,” he said. ARRC is proposing to build an international airport, seaport as well as a mixed-use development on reclaimed land off the coast of Sangley Point in Cavite. Unsolicited proposals for the Clark Airport are also taking a backseat for now. The group of GMR Infrastructure Ltd. of India and Megawide Construction Corp. submitted a proposal to the government to develop the Clark International Airport to be able to handle up to 100 million passengers per year over a period of 50 years, worth close to P200 billion.
Strict action for not refunding taxes, levies on cancelled flight tickets: Aviation minister Gajapathi Raju
Aviation minister Ashok Gajapathi Raju today warned airlines and travel portals of “strict action” if they did not refund taxes and levies to passengers for the cancelled tickets. Civil Aviation minister Ashok Gajapathi Raju, in a series of tweets, said the practice of not refunding taxes and levies to passengers for a cancelled ticket was “against” the existing DGCA regulations and that he had received several complaints in this regard. The Directorate General of Civil Aviation (DGCA) had last year put in place new passenger-friendly air ticket cancellation rules. The rules make it mandatory for airlines to provide an unambiguous detail of the refund to a passenger. “I’ve received complaints that no refunds are being given by airlines/travel portals against cancellation for several ticket categories,” Raju said in a tweet. “This is against existing DGCA regulations. All Govt. (sic) taxes and levies have to be refunded under all circumstances,” he said in another tweet. “Instances of such violations should be brought to the notice of DGCA and it will take strict action,” the minister tweeted. Donte Jackson Jersey