PAC’s study of PPPs to begin with a visit to Delhi airport
The Public Accounts Committee (PAC) is starting a detailed study on public-private partnerships (PPPs) in the country with a visit to the Delhi international airport on Tuesday. The panel, which has already constituted a sub-committee to discuss the issue, will start its work by studying the PPP between the Civil Aviation Ministry and the GMR Consortium on Tuesday. A source in the panel told BusinessLine that the panel will meet officials of the Airports Authority of India, Civil Aviation Ministry and the GMR on Tuesday. “We will study such PPPs in other sectors like roads, power generation, distribution and use of natural resources such as spectrum and minerals,” the PAC member added. Earlier, during the UPA regime, the panel, then headed by BJP leader Murli Manohar Joshi, studied the PPP between the AAI and GMR and said the PPP in Indira Gandhi International Airport could be considered a success as there have been significant improvements in services for the travelling public. “It is also noteworthy that the Airports Council International had adjudged the airport as the second best in the world in the category of 25-40 million passengers per annum,” it said, adding that the panel found several lacunae and shortcomings in the operationalisation of the joint venture mode and implementation of Operation, Management and Development Agreement (OMDA) and State Support Agreement (SSA). “We will go into the details of measures such as development fees imposed on passengers. We will also study the commercial use of land allotted to the DIAL,” the member added. The panel member said the effort was to ensure that the Comptroller and Auditor General has a role in auditing the PPPs in which the money from exchequer is involved. Steven Matz Authentic Jersey
SPV to free Air India of debt in the works
South Asia’s oldest airline, Air India, is seeking to jettison its decades-old debt baggage as part of a programme that would allow the country’s flag carrier to transfer loans to a dedicated company and create a capital structure underpinning its turnaround initiatives. The idea of a Special Purpose Vehicle (SPV), which would hold the debt and assets of the airline founded in 1932, was discussed in a meeting called by minister of state for aviation Jayant Sinha in Mumbai last month. Banks and Air India officials attended the meeting, after which the airline has started its spadework on the modalities of asset and debt transfer. Two senior Air India executives confirmed the move to ET and added that details are being worked out. “The SPV idea was proposed and is being discussed and a lot of detailing is still being worked out before it is finalized,” said a senior Air India executive, who did not want to be identified. Air India has debt of about Rs 45,000 crore on its balance sheet: Of the loans,Rs 14,000 crore are aircraft loans, while the rest are working capital funds that include non-convertible debentures of Rs 7,500 crore. The airline has an interest-servicing liability of about Rs 4,000 crore annually. Air India CMD Ashwani Lohani had told ET in recent interviews that it is difficult for AI to become profitable with this debt baggage. “My biggest threat is debt, not Jet. Remove that, and we will beat everyone hollow,” Lohani told ET in January this year. The Air India executive said details such as the duties either Air India or the SPV has to pay to transfer the ownership of assets for AI to an SPV company need to be finalized before the company decides to create an SPV. Analysts said the move will allow Air India clean up its books. “Having SPVs with assets and liabilities, especially for non-aircraft-related debt, is a good idea. As much as possible, nonaircraft-related assets such as land and buildings should be leveraged to clean up the balance sheet,” said Kapil Kaul, CEO of Centre for Asia Pacific Aviation, an aviation consultancy firm, in India. “However, without changing governance and ensuing accountability, nothing strategic will happen. We must not let one or two years of operating profit mislead us to do more tactical and short term changes as AI needs structural changes across the entire enterprise,” Kaul further said. The current SPV plan to transfer debt is likely to be an alternative to the earlier plan to convert a part of the loans of public-sector banks into equity and give them board representation. Official sources in the aviation ministry said the idea did not find favour with the Prime Minister Office (PMO), which had discussed the proposal in a meeting held in January. “The PMO did not like the idea of giving equity to banks in a loss-making airline. It, however, did not reject it either,” said a senior ministry official, who did not want to be identified. Thomas Rawls Jersey
Government okays Rs 4,500 crore project to revive 50 airports, airstrips
The Cabinet approved a proposal to revive 50 unserved and under-served airports as well as airstrips at an estimated cost of Rs 4,500 crore. With the plan, the government is looking to enhance air connectivity to small cities and towns while the revival of such airports and airstrips would be “demand driven”. The proposal was approved by the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi. “The total cost of the project is estimated to be Rs 4,500 crore. 15 airports/airstrips each would be revived during 2017-18 and 2018-19 each while 20 airports/airstrips would be revived during 2019-20,” an official release said. As many as 50 unserved and under-served airports and airstrips of state governments, Airports Authority of India (AAI) and civil enclaves would be covered. “Small cities/towns shall be connected on commencement of operation of flights to under-served/unserved airports. “It will further boost the economic development in these areas as well as surrounding areas in terms of job creation and related infrastructure development,” the release said. While noting that revival plan would be demand driven, the government said it would depend on firm commitment from airline operators as well as the state governments in terms of providing various concessions. The unserved and under-served airports are to be developed “without insisting on financial viability”, the release said. In the Union Budget, Finance Minister Arun Jaitley had announced plans for making adequate provisions for revival of unserved and under-served airports. To make flying more affordable, the government has already unveiled the ambitious regional connectivity scheme UDAN (‘Ude Desh Ka Aam Naagrik’) under which fares are to be capped at Rs 2,500 for one-hour flights. Devin Funchess Womens Jersey
Cheaper flights on anvil: Government to declare UDAN bid results by March 15
The government will likely announce the winners of its regional connectivity scheme UDAN by March 15, CNBC TV18 reported citing unidentified sources. It said that 11 companies were learnt to have submitted the bids operating subsidised flights on 200 routes across the country, covering 43 airports. The government had invited bids from carriers to start regional flights at a discount on routes and airports that are underserved, in order to facilitate cheaper connectivity for a larger section of the society. The government will choose the eligible airlines to operate flights under UDAN scheme through a reverse bidding process, where the airlines will claim government subsidies and tax incentives in return for flying at tariffs which will be capped. Reportedly, the 11 airlines that had submitted bids under the scheme include Air India, Spicejet and TruJet, which have small aircraft which are most suitable for operating regional flights. Others who submitted bids included mostly unscheduled and charter operators. SpiceJet has submitted bids for flights originating from Mumbai, Delhi and Kolkata, and has not sought any government subsidy. The scheme seeks to take the number of active airports in the country to 118 from the current 75, by making operational 43 airports which have high potential under the UDAN scheme. Out of these 43, the government says it has identified 30 airports at which the operations could be started immediately. RCS (Regional Connectivity Scheme), or UDAN (Ude Desh ka Aam Nagrik), was introduced as part of the National Civil Aviation Policy 2016 and was formally launched in October last year. It aims to provide opportunity to the masses to fly with fiscal incentives, infrastructure support and monetary subsidies such as viability gap funding. Under the scheme, the routes will be awarded to the carriers for three years. The scheme itself will remain operational for 10 years. Under UDAN scheme, the fare for a one-hour aeroplane journey of about 500 kilometres or a 30-minute helicopter journey will be capped at Rs2,500, with proportionate pricing for other routes with different lengths and duration. T. J. Logan Authentic Jersey
SpiceJet shuns UDAN subsidies
No-frills carrier SpiceJet will fly without subsidies to unserved airports from three of India’s biggest urban centers, helping achieve the federal goal of boosting regional aviation connectivity in a country that relies on crowded railroads and rickety roads to link its cities to the hinterland. Among eleven airlines applying for regional flights under the plan patronized by Prime Minister Narendra Modi, SpiceJet has offered to operate regional flights out of Mumbai, Kolkata and Delhi without cash support from the government, according to two government officials. The program, Ude Desh ka Aam Nagrik or UDAN, aims to enhance grassroots adoption of aviation as a transportation medium and offers carriers cash subsidies for selling up to 40 seats at Rs 2,500 for each hour of flight. “SpiceJet would earmark 20 out of 70 seats as regional seats on flights operated to these destinations. Of the 20 seats, 10 seats would be sold at Rs 2,500/ hour of flight. Barring these ten, the rest would be sold at market rates,” said an aviation ministry official, who did not want to be identified. An email sent to SpiceJet did not elicit any response until the report went to print. All other airlines have opted for subsidies under the plan that offers the carrier cash. The regional connectivity program will also witness the return to commercial aviation by G R Gopinath, considered the father of low-cost flying in the country. Deccan Aviation, owned by Gopinath, has applied for flights in the Northeastern states. “They plan to make Shillong their base and connect destinations in Northeast with 14-seater aircraft,” said one of the officials quoted above. About eleven airlines, including AI, have bid to connect 43 regional airports in the country in the first phase, said an Airports Authority of India (AAI) official. Apart from Alliance Air, SpiceJet, and Deccan Aviation, other carriers that have applied include India Fly Safe (Sajjan Jindal Group), TurboMegha (Trujet Brand), Air Odisha (flights within Odisha), Airlines Allied Services Ltd (flights within Rajasthan) and Bharat Aviation (flights within Maharashtra). “This is in the first phase. But we will keep adding flights in the future as we aim to provide connectivity to all 600 airports across the country,” said the official, referring to the Regional Connectivity Scheme (RCS). Analysts said many regional airports may make sense for airlines with a pan India network as they may pick passengers from these airports to feed their network. “We believe that many RCS routes have significant profit potential especially for 48 and 78 seater aircraft. This is further enhanced when a pan India carrier links it up to its national and international grid. Putting up a bare minimum seats under RCS and seeking zero cash subsidy is a smart strategic move. It enhances the pan-India operator’s chances of winning the bid since smaller players may find it difficult to offer higher number of RCS seats at zero cash subsidy. The operator would enjoy all the fiscal and monetary benefits of RCS, no airport charges and a three year exclusive operating rights on that route,” said Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG. “It helps the govt too. The subsidy saved can be used to revive other non-operational regional airports. By showcasing success in the very first round of bidding, more airlines may get interested in the second round of RCS bids which will happen in a few months from now. This will give a fillip to investments, tourism and job creation in the interiors of India, which is the broader objective of RCS,” he added. The government, which expects the first regional flight to start in a month, expects the subsidy outgo during the first year of regional operations to be about Rs 350 crore. Linus Ullmark Womens Jersey
Air India appoints McKinsey to advise on business plan
Air India has appointed McKinsey as consultant to advise on firming up its long term strategic business plan. The consulting firm will give AI a detailed cash-flow based on the plan it prepares, which will focus on redrawing of network. It will also tell the national carrier how much global airlines of its size should be generating and advise on bridging the gap. “McKinsey will also advise us on marketing strategies and help us bring our frequent flyer programme to global standards,“ said a senior AI official. The airline had shortlisted three firms -McKinsey Bain and EY -from a number of applicants on the basis of presentations made to the AI brass, following a tender inviting proposals issued last October. The move to take a consultancy help in network planning comes at a time when the government has drawn up ambitious plan for AI. It has decided that AI, which currently has 118 planes, will almost double its fleet in next four years without burde ning the taxpayer-funded exchequer further. The airline will grow by leasing aircraft instead of purchasing them. By March 31, 2020, AI group is looking at a fleet of 232 planes as some planes from the 111-aircraft order placed in 2006 are yet to be delivered. AI will take on lease 40 more Airbus A-320s for the erstwhile Indian Airlines that serves domestic and nearby international routes. It will order about 35 more turboprops.And AI Express, which currently has 17 Boeing 737s, will get 18 more B-737. The airline’s total loan is about Rs 50,000 crore, of which Rs 28,000 crore is working capital loan at an interest rate of 10%. It is seeking to convert, whatever possible of this working capital loan to 7% LIC loan. Switching Rs 10,000 crore alone will lead to a saving of Rs 300 crore annually in debt servicing, the airline says. The annual debt servicing of Rs 4,000 crore remains a sore point with the airline. Aviation minister Jayant Sinha is spearheading the effort to revive AI through innovative financing. He suggested that AI also speak to LIC for conversion of some high-cost loan to cheaper debt. A financial support of Rs 30,231 crore was approved for AI in 2012 of which it has received Rs 22,280 crore as equity infusion till March 2016. Of AI’s current fleet of 118 planes, 41 are wide body planes used on long haul and a handful domestic routes; 66 narrow body used on domestic and nearby international routes and 11regional jets. Nemanja Bjelica Womens Jersey
Slash taxes to support aviation to drive economic growth: IATA
Global airlines’ body IATA has asked governments across the world to slash taxes and support the aviation sector through improved infrastructure to drive economic growth, generate employment and connect people. “Our world has grown much wealthier through trade and travel. Air travel liberates people to live better lives and makes our world a better place… Aviation is the business of freedom and we must continue to work together to make it so,” Alexandre de Juniac, IATA’s Director General and CEO, said at the US Chamber of Commerce 2017 Aviation Summit in Washington. Making a strong plea for reducing the tax burden on airlines, he said the ‘Airlines for America’ (body of major US carriers) “estimates that taxes account for more than a fifth of the cost of the average domestic ticket. “In a country as big, beautiful and full of opportunity as the US, why have a taxation policy that discourages travel? Travel stimulates the economy with tourism dollars and business development. We hope that the Trump Administration will create jobs by dramatically reducing the tax burden on travel.” Contending that the aviation sector in the US contributed USD 680.1 billion to GDP and supported 6.2 million jobs, de Juniac sought a reduction in the tax burden on aviation and air travellers, besides a new approach to the provision of air traffic services. Michael Irvin Authentic Jersey
Air India aims to raise $470 million to fund Dreamliner planes
National carrier Air India has floated a tender to raise a bridge loan of $470 million (Rs 3,149 crore) for financing the remaining four of its ordered Boeing 787 Dreamliner planes. The last date of bidding for banks is March 21. The state-run carrier had in 2005-06 placed an order for 27 Boeing 787 Dreamliner planes as part of the mammoth 111 plane order placed with the american plane maker and its European rival airbus. The deal was valued at $15 billion. Air India is financing all these planes via sale and leaseback agreements, which means it sells each delivered plane to a lessor at a premium and then leases it back for monthly rentals. The bridge loan is being raised as an interim funding arrangement until sale and leaseback contracts for the planes is signed. In the tender document, Air India said it has concluded sale and leaseback agreements for 21 planes which it is currently operating, and tied up for bridge loans for the 23rd and 24th plane which were delivered in November 2016 and January 2017. Sale and leaseback of the two planes is also under process. Jacob deGrom Womens Jersey
AirAsia India hopes to have 20 aircraft by middle of next year
AirAsia India plans to increase its fleet size to 14 aircraft from the current eight by October this year and get to 20 aircraft by the middle of next year, Amar Abrol, the airline’s Managing Director and Chief Executive Officer, said on Thursday. In an informal meeting with the media, Abrol said a project team was being formed to look at international operations as several issues needed to be looked into. Govt regulations The Indian government regulations stipulate that an airline must have 20 aircraft in its fleet before it can start international operations. “It will take a year from now to go international,” Abrol said. Pointing out that the aircraft in the fleet allow the airline to fly to international destinations which are about four-and-half hours away from India, Abrol said, “Naturally, our strength lies in the East. AirAsia India could look at plugging into Kuala Lumpur, Bangkok and Jakarta.” He added that AirAsia India will also look into how to plug into the “sister airlines” such as AirAsia Malaysia and AirAsia Thailand already flying to India. Network strategy “AirAsia Malaysia is flying to Bhubaneshwar four times a week. So we can certainly look into that. There are 96 weekly landings of AirAsia airlines from other countries that come into various cities here. We will also compete will the sister concerns,” he said. Abrol said the airline’s network strategy was to largely link metro cities with tier II cities. “We are keen on flying Kolkata-Srinagar. We will do Kolkata and a bit of the North-East and then potentially connect the East to the West. It is being studied,” he said. Abrol claimed that the airline did an average fare yield of about ? 3,100 in January this year. Eric Dickerson Authentic Jersey
Andhra Pradesh govt planning to launch airline named after Amaravathi
The Andhra Pradesh government is planning to launch an airline, named after Amaravathi, once the state capital is developed. An official in the N Chandrababu Naidu-led government told PTI that the initiative is aimed at bringing global exposure to the upcoming city and also give a boost to the aviation sector in the state, adding that the airline is likely to be named after the state capital. “When Amaravathi is developed, the government may like to have its own international airport and airline depending upon the requirement at that particular time,” he said. Currently, there are five commercial airports in Andhra Pradesh — Visakhapatnam, Tirupati, Vijayawada, Rajamundry and Kadapa. Besides, six greenfield airports — Bhogapuram, Dagadarthi, Orvakallu, Kuppam, Tadepallegudam and Ongole –are being developed through public-private partnership (PPP). According to the official, even though the government has reduced VAT on jet fuel to 1 per cent, the losses incurred on account of this have been offset by the surge in air traffic in the state. “Prior to the implementation of the AP Aviation Policy 2015, there was a four-per cent VAT on aviation turbine fuel. Later, it was reduced to one per cent. Due to multiplication in the number of flights after the VAT reduction, the revenue loss to the state has been offset,” he said. Carl Soderberg Jersey