FDI Alone Won’t Help – Major Restructuring Needed For AAI Take-Off
The latest foreign direct investment (FDI) reforms in the civil aviation sector should ideally bring the focus back on airport infrastructure in many brownfield ventures which have failed to improve, thanks to the triad of slothful Airports Authority of India (AAI), labour unions and opposition-ruled states blocking such moves. The true test of the benefits of raising FDI in brownfield airports to 100 percent without prior approval (earlier, FDI beyond 74 percent was subject to approval) may actually come when Chennai airport’s ceiling doesn’t crumble every other day. India is one of the fastest growing aviation markets in the world and boasts of some world-class airports in Delhi, Bengaluru, Hyderabad and Mumbai on the one hand, and hundreds of ghost airports with not a single flight on the other. Now that back-to-back reforms for airlines have been unleashed, by diluting the 5/20 restriction for overseas flights and removing caps on foreign investment, it is time the country got its airport infrastructure up and running too. If the airport infrastructure fails to keep pace, the liberalisation in airline ownership and operational conditions would be rather meaningless. Drew Bledsoe Womens Jersey
Foreign airlines can control Indian carriers via group firms
While foreign airlines can’t directly own more than 49 per cent in Indian airlines, despite Monday’s liberalised Foreign Direct Investment (FDI) policy, their group companies or investors can fully own airlines in India with government approval. So while the likes of AirAsia and Singapore Airlines will continue to have a cap of 49 per cent on their stakes in Indian arms, AirAsia India and Vistara, foreign funds and non-airline companies will be allowed to fully own a domestic, Indian airline. The government is looking to dilute the rule which makes it mandatory for an Indian carrier to be controlled and owned by an Indian or an Indian entity. This will increase competition for Indian airlines, as deep-pocketed airlines from the Gulf will be able to set up shops in India through their group companies. This will allow the likes of Etihad, Singapore Airlines and AirAsia to gain management control of Jet Airways, Vistara and AirAsia India through their group companies. Qatar Airways had earlier tried to use the Qatar Investment Authority, a sovereign wealth fund, to buy into Indian budget carrier IndiGo. Donald Trump Jersey
Hybrid-till airport tariffs will increase passenger charges: IATA
A global airlines’ association on Tuesday raised concerns over a provision in the recently approved national civil aviation policy (NCAP) to ascertain airport tariffs. According to International Air Transport Association (IATA), the approved policy states that “future tariffs at all airports will be calculated on a hybrid-till basis” – which can make air travel more expensive. “While the draft NCAP indicated that ‘tariff at all future airports will be calculated on a hybrid-till basis’, the final policy states ‘future tariffs at all airports will be calculated on a hybrid-till basis’,” said Conrad Clifford, Regional Vice President, Asia Pacific, IATA. The “hybrid-till” model is used to ascertain aeronautical charges at airports. The model permits airport operator to include a portion of its income generated through non-aeronautical side of activities with those of aeronautical ones to calculate the total earnings. The operator generates revenue by charging aeronautical activities such parking, housing and landing (PHL). It also earns revenue from non-aeronautical streams like duty free shops, food and beverages (F&B) outlets, vehicle parking and advertisements. Based on the total earnings from the “hybrid-till” model, aeronautical rates are then decided by Airports Economic Regulatory Authority (AERA). However, under a “single-till” model, earnings garnered through aeronautical and non-aeronautical activities are added together to form the total income. This model is considered to be more cost effective for airlines, as airport charges constitute around 14 per cent of the total operational cost of a passenger carrier. Clifford said that the change will not just impact the basis for tariff determination for private airports, but also signal AAI (Airports Authority of India) to switch from the “single-till” approach to “hybrid-till”. “This makes AERA a toothless entity. Passenger charges in India will increase, making air travel more expensive. And it contradicts one of the stated intentions of the NCAP to make flying affordable,” Clifford pointed out. The global airlines’ association said that it will approach the Ministry of Civil Aviation to clarify the “seemingly minor change in the wording”, which could have a major impact on airport charges in India. “The NCAP has reduced economic regulation in India to a single bullet point by mandating hybrid-till as the basis for tariff determination, while being silent on other critical aspects of economic regulation such as the rate of return, regulatory asset base, separation of airport assets and costs, etc,” Clifford added. He said, “It ignores the conclusions reached by AERA and the Ministry of Finance after an extensive evaluation that the single-till is the most appropriate approach for India, with no explanation given for upturning AERA’s earlier order.” Eddie Vanderdoes Jersey
Foreign airlines can never fully own local carrier: RN Choubey
Relaxed FDI norms will ensure increased competition in the “huge” domestic aviation sector but foreign airlines will never be allowed to fully own a domestic carrier, a top government official said today. In a significant reform measure aimed at bolstering the country’s high growth potential civil aviation sector, the government has allowed foreign entities, except overseas carriers, to own up to 100 per cent stake in local airlines. Besides, 100 per cent Foreign Direct Investment (FDI) has been permitted through the automatic route in brownfield airports. “There will be more and more competition (in aviation sector). That is the signal that is going out,” Civil Aviation Secretary R N Choubey told PTI about the relaxed FDI norms and their long-term impact. “With 22 per cent growth rate I think it is a huge market for anybody to come and invest,” he said. India’s domestic traffic has been growing in double digit since last 21 months owing to a host of factors including low fuel prices, ease of doing business and capacity augmentation by the domestic carriers, among others. Driven by low fares, domestic air travel witnessed an increase of around 21.63 per cent in number of passengers last month as compared to May 2015. According to an analysis conducted by the ministry, air fares declined by 18.1 per cent in the February-April period of this year over the same period of 2015. While 100 per cent FDI has been allowed in airlines, the limit for foreign carriers remains at 49 per cent. “Foreign airlines will not be allowed to invest more than 49 per cent. A foreign airline will never get to own a (Indian) airline,” Choubey said. William Hayes Womens Jersey
Airlines providing regional connectivity to have simple rules for entry and exit: Aviation ministry
The civil aviation ministry has decided to come up with easy entry and easy exit rules for airlines providing regional connectivity, as it wants to ensure maximum industry participation in a programme that seeks to take flying to the masses. “We do not want a situation where tough exit rules discourage airlines or companies from launching airlines to provide regional connectivity. We will provide an easy entry and easy exit option to operators,” aviation secretary RN Choubey told ET. In the easy exit option, any airline that starts operations on regional routes will be allowed to shut shop and leave if it feels that the operations will not be profitable after a stipulated period of time. The duration will be decided at the time when the route is awarded to a particular airline. These rules are likely to be part of the policy on regional connectivity that will be released within 10 days. Consultancy firm Deloitte is preparing the report for the government. Currently, no such exit rules exist for any other category of airlines. The airline companies that want to participate in the regional connectivity scheme will be allowed to start with a single aircraft and the fleet has to be expanded to three planes in a year’s time. Licences will be issued under the regional airline permit. Analysts welcomed the move. “Allowing easy entry and exit will lead to a surge in the number of new airlines with small fleet and small aircraft. It will be a big plus for the implementation of the regional connectivity plan,” said Amber Dubey, partner and India head of aerospace and defence at consultancy KPMG. “Also shows that the government is indeed serious about ‘less government more governance’, enhancing ease of doing business and respecting market forces.” According to the regional connectivity plan, the government seeks to provide air connectivity with unserved airports at an airfare of Rs 2,500 an hour with small 18-20 seat aircraft. Regional flights will also get subsidy from the government — 80% of it will come from the centre and the rest from states. The government intends to connect more than 300 defunct airports with flights. It, however, doesn’t expect a huge participation during the initial days. The government expects the initial awards for routes on a nomination basis. The government has decided not to open the regional routes to non-scheduled operators, who will have to convert themselves into scheduled operators to become eligible. Don Mattingly Authentic Jersey
Domestic air traffic: How IndiGo, Jet Airways, Air India, Go Air, AirAsia India, Vistara performed in May
More and more people are flying in India as is evident from yet another month of double-digit growth in May. Indian air carriers flew 86.69 lakh passengers during the month, 21.63 percent more than 71.29 lakh passengers last May, according to government (DGACA) data. Relaxation of FDI norms for the aviation sector buoyed stock prices of Jet Airways, SpiceJet and Indigo-parent Interglobe Aviation on Monday on the BSE. At around 3.10 p.m., SpiceJet share rose 7.82 percent to trade at Rs. 69.60, Jet Airways was up 6.53 percent at Rs. 585.90 and Interglobe Aviation had gained 5.92 percent to trade at Rs. 1,070.20. Indigo maintained its leadership with a market share of 38.5 percent in May, carrying 33.37 lakh passengers. However, it marked a marginal decline from 38.7 percent in April. State-run Air India increased its share for the third month in a row to 15.6 percent in May, while Jet Airways, the second-biggest carrier, also saw its market share go up to 16.1 percent last month from 15.9 percent in April. SpiceJet’s share declined to 12.6 percent in May from 12.9 percent in April. Go Air also saw its share fall marginally to 8.1 percent from 8.5 percent in April. AirAsia India and Vistara — the two ventures in which the Tata Group has stakes — improved their share to 2.2 percent and 2.5 percent, respectively, from 2.1 percent and 2.3 percent. In absolute terms, Jet Airways flew 13.94 lakh passengers while Air India carried 13.49 lakh passengers, indicating that the gap between the two full-service airlines is narrowing. Chandler Jones Womens Jersey
Air India to select jets for regional connectivity
Air India is planning to launch flights to more regional destinations across India, and has initiated the process of identifying the aircraft to be used. The Economic Times reported the national carrier’s chairman & managing direction, Ashwin Lohani, as saying that he is planning to introduce several smaller jet aircraft to facilitate the expansion. “Our prime focus is to increase regional connectivity. We will try to connect as many places as possible,” Lohani was quoted saying. “We are looking at various [aircraft] options, but smaller jets seem to fit the bill. They would be faster, cost less and, perhaps, even be cheaper to operate,” he added. Currently, the airline operates three Bombardier CRJ-700 regional jets, along with a fleet of ATR turboprop aircraft. The new aircraft are likely to be Bombardiers. Jack Ham Womens Jersey
Passenger Centric Amendments proposed for Airline Industry
The Minister for Civil Aviation Mr. Ashok Gajapathi Raju said that his Ministry was committed not only to the growth of the Airline industry but also to ensure that flying for most Indians becomes a pleasant experience. In keeping with this commitment he along with MOS Dr. Mahesh Sharma, presided over a presentation made by DGCA with regard to Passenger Centric Initiatives. The first category of amendments have been made in CARs related to “Refund of Air Tickets”. The Ministry has proposed that the refund process should be completed within 15 working days in case of domestic travel and 30 working days in case of international travel. It also proposed that in case of cancellation of tickets, statutory taxes and user development fee or airport development fee or passenger service fee should be refunded. The Ministry has also proposed in this category that under no circumstances cancellation shall be more than the basic fair. In the second category of CARs related to “Denied Boarding, flight cancellation and flight delays”, the Ministry has proposed that an amount equal to 200% of booked one-way basic fair plus airline fuel charge subject to maximum of INR 10,000/- would be paid to passengers in case airline arranges alternate flight that is to depart after one hour but within 24 hours of the booked scheduled departure. Josh LeRibeus Authentic Jersey
Chinks in the new aviation policy’s armour
India’s first-ever National Civil Aviation Policy (NCAP) formulated by the NDA governmentis no doubt well-intentioned and aimed at achieving overall growth of the sector in a structured manner. However, several shortcomings, as pointed out by analysts, could derail the projected growth and objective. The policy has touched almost every aspect of civil aviation, but gives no direction for professionalising the Directorate General of Civil Aviation (DGCA) and Bureau of Civil Aviation Security (BACS), crucial entities that govern aviation safety and security in the country. Though measures have been announced to strengthen both these entities and bridge the deficit, the policy is silent on how to radically transform these organisations to meet modern-day challenges and to be process-driven to deliver world-class service. With around 20 per cent growth in the number of air passengers, what India needs is strong air safety and security regulators. The expected upside in helicopter operations, private flying and regional airlines will add to the pressure. Kapil Kaul, Chief Executive Officer, South Asia, Centre for Asia Pacific Aviation (CAPA), says: “India’s safety and security dynamics are structurally changing, NCAP is not focused on managing these challenges.” Mark Barberio Authentic Jersey
Civil aviation policy potential gamechanger
The Modi government’s integrated Civil Aviation Policy has the potential to be a gamechanger not just for the airline industry’s revival and growth but also for the government in terms of policy-making process and orientation. Sustained engagement with stakeholders and a win-win policy orientation can be adopted for other sectors too. The crux of the policy is the dove-tailing of industry growth with passenger benefits. The government wants more members of the 30-crore strong middle class to fly which would help the troubled airline industry by boosting revenues and possibly profitability too. Though the low-cost airlines played a major role in making flying affordable for the upper middle and middle classes, the growth and expansion in number of tickets sold has not been substantial and sustained. One such initiative is the Regional Connectivity Scheme with a cap of Rs 2500 for an hour-long flight of about 500-600 kms which it hopes would lure more people to fly. Similarly, diluting the norms for airline companies to fly on international routes — the 5/20 rule — would mean more frequent flights and possibly at competitive prices. The integrated policy covers 22 areas and most of them would be acceptable to all. But industry analysts and observers are critical of aspects the policy is silent about, be it privatisation of loss-making Air India or the roadmap for setting up an independent and autonomous Civil Aviation Authority. Rod Langway Womens Jersey