Government weighs options on Air India’s Rs 30,000 crore debt
The government is weighing multiple options to raise money from Air India, going beyond the recommendation to take over Rs 30,000-crore debt suggested by NITI Aayog, which suggested stake sale of the cash-sucking carrier. One of the options is to go for a reverse bid that will pit the Rs 30,000-crore debt against rights such as landing slots and other operating assets that are owned by the national airline, which give it an edge over all its rivals, many of which are finding ways to reduce costs when they fly abroad, sources said. In addition, Air India enjoys a nearly unmatched infrastructure presence at Indian airports. “There are ways to improve the returns for the government, which will be considered, but at the moment these are all options and the panel of ministers will chart the best course of action,” said a source. Air India has nearly Rs 60,000-crore debt on its books, of which around Rs 22,000 crore is linked to its aircraft purchase programme. There are also loans of around Rs 6,000-7,000 crore related to its operations, which will go with the airline. NITI Aayog had suggested that the remaining amount could be taken over by the government to make the airline an attractive proposition for the new buyer. The sources said that writing off the amount will impose a burden on the exchequer as the government will have to take over the loans extended by banks. The lenders have refused to restructure the loan as it is seen to be an unviable proposition. “Through a reverse bid, we can realise better value and also make the whole process more transparent,” said a source. Investment bankers said that other options were also possible and they could look at the global experience if mandated. The details, including the extent of the sale, will be worked out by a panel of ministers headed by finance minister Arun Jaitley. Jahleel Addae Authentic Jersey
No plans to expand, invest in India: Oman Air
Oman Air will not expand its operations to India or buy a stake in Air India, under current circumstances, an official from Oman Air has confirmed. It was reported that Oman Air was likely to invest in the Indian carrier if the open skies agreement was worked out between the two countries; however, with troubled times for the aviation industry, the plan has been put on hold, along with the scheme to increase operations to India. “We have no plans to extend, unless entitlements are further increased for specific domestic airports,” Paul Gregorowitsch, chief executive officer (CEO) of Oman Air told the Times of Oman when asked about expanding operations to India. He stated that there was “no appetite to invest in foreign airlines,” implying that there was no plan to invest in Air India. Jared Spurgeon Jersey
Clarity on GST over aircraft imports soon
The finance ministry has assured airlines that confusion over the applicability of the goods and services tax (GST) on imported aircraft that resulted in double taxation will be sorted out soon and a clarification will be issued at the GST Council meeting likely to be held next month. The matter is related to taxation on aircraft imported before July 8. “Basis that assurance from the finance ministry, we have got our aircraft approved on Saturday. We have given a letter of undertaking, which says that we will pay if the government does not issue a clarification in the next GST Council meeting,” said a senior Air India official, who did not want to be identified. Apart from Air India, one aircraft each of IndiGo, Vistara and AirAsia India are stuck because of the confusion, as are planes of other airlines. “Our aircraft is still stuck as we await clarity on it from the government,” said a senior executive of an airline whose aircraft is still awaiting clearance. The next GST Council meeting is likely to be held on August 8, 2017. The council makes recommendations on matters related to the tax. David Booth Womens Jersey
What is the divestment of Air India all about?
The Union Cabinet on June 28 gave its ‘in-principle’ nod to divest stakes in Air India — a wholly owned government airline. The Cabinet decided to go for Air India’s strategic disinvestment, which means the government is willing to shed a substantial portion of its stake and hand over the management of the ailing airline to the private sector. The Cabinet also approved strategic disinvestment in five of Air India’s subsidiaries — its MRO unit Air India Engineering Services (AIESL), ground handling arm Air India Transport Services, Air India Charters which operates Air India Express and Airline Allied Services which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels), along with a joint venture AISATS. How did it come about? Civil Aviation Secretary R.N. Choubey said at a press conference on June 29 that government think-tank NITI Aayog’s recommendation on strategic disinvestment of Central public sector units, including Air India, was the immediate trigger for its stake sale. In its report earlier this year, the NITI Aayog recommended an outright sale of Air India. The proposal was then sent for consideration of a core group of secretaries on disinvestment, chaired by the Cabinet Secretary. The recommendations given by the Cabinet Secretary-led group were forwarded to the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, which gave its ‘in-principle’ nod for the national carrier’s strategic sale. Air India’s privatisation was first proposed in 2000 when the previous National Democratic Alliance (NDA) government decided to sell 51% of equity of the erstwhile domestic airline Indian Airlines, with 26% stake to a strategic partner. It also decided to allow disinvestment of 60% of Air India, which was running international operations, with 26% foreign entity stake. The move was dropped after opposition from the then Civil Aviation Minister Sharad Yadav. Why does it matter? The government’s efforts to turn around the finances of Air India seem to have failed with the national carrier’s eroding market share, continuous losses and a mountain of debts. Air India has not registered profit since over a decade after the merger of the erstwhile Indian Airlines (domestic operations) with Air India (international operations) in 2007. However, the primary reason for Air India’s disinvestment was the government’s inability to cope with its debt of ?52,000 crore. Around ?22,000 crore of the total debt accounts for aircraft acquisition loan and the rest is related to debt for meeting its daily and operational expenses. Air India Chairman and Managing Director Ashwani Lohani recently said the “mountain of debt” which the present management “acquired appears insurmountable and is at the root of all the problems.” Bradley McDougald Authentic Jersey
Pratt engine fixes prompt IndiGo to ground seven airbus planes
India’s biggest airline grounded at least seven Airbus SE jetliners as it awaits fixes for balky Pratt & Whitney engines, joining several carriers around the world that have pulled the planes from service. IndiGo stopped using one A320neo aircraft this month after grounding four in June and two in May, according to data from flight-tracking website Flightradar24. Including IndiGo’s planes, there are 12 A320neos now out of service across five airlines worldwide, said a person familiar with the matter, who asked not to be named because the information isn’t public. “We are aware thata limited number of Pratt & Whitney GTF-powered A320 aircraft are temporarily out of service for engine upgrades,” the engine maker said in a statement. “We are working with Airbus and our airline customers to ensure that any disruption involved will be minimized.” Pratt, a unit of United Technologies Corp., has been working to fix durability issues and production snags that have hampered the roll-out of the engine, which was selected to power new jets from Airbus, Bombardier Inc. and Embraer SA. Airbus deliveries have been affected amid problems with engine parts, including the carbon seal and combustor liner. For IndiGo, a lack of spare parts for Pratt’s new geared turbofan has been compounded by a new Indian tax on goods and services, which has made importing products more difficult, said a separate person familiar with the matter. ‘Operational Disruptions’ The airline, which is the world’s biggest customer for the A320neo with 430 on order, said in a statement that it “faced some issues with the neo engine, causing operational disruptions.” Japan’s ANA Holdings Inc. and Hong Kong Express Airways Ltd. are also among airlines that have have grounded some aircraft recently. “The A320neo and its GTF engine option, being a new aircraft type as well as a new engine type, require time to mature in their operational reliability,” HK Express, which has had one of its three A320neos under maintenance since June, said in a statement. ANA is operating one aircraft while the other one is undergoing maintenance after issues with both its engines, Youichi Uchida, a company spokesman, said by phone. Airbus is working with the engine maker to ensure disruptions for airlines are minimized, it said in an emailed statement. Pratt said it received certification in April for a fix to the carbon seal issue. Kawann Short Womens Jersey
Surging heat may limit aircraft takeoffs globally: Study
Rising temperatures due to global warming will make it harder for aircraft around the world to take off in coming decades, according to a study. During the hottest parts of the day, 10 to 30 per cent of fully loaded planes may have to remove some fuel, cargo or passengers, or else wait for cooler hours to fly, researchers said. “Our results suggest that weight restriction may impose a non-trivial cost on airline and impact aviation operations around the world,” said Ethan Coffel from Columbia University in the US. As air warms, it spreads out, and its density declines. In thinner air, wings generate less lift as a plane races along a runway, researchers said. Thus, depending on aircraft model, runway length and other factors, at some point a packed plane may be unable to take off safely if the temperature gets too high. Weight must be dumped, or else the flight delayed or cancelled, they said. Average global temperatures have gone up nearly one degree Celsius since about 1980, and this may already be having an effect. Worldwide, average temperatures are expected to go up as much as another three degrees Celsius by 2100, they said. However, heat waves will probably become more prevalent, with annual maximum daily temperatures at airports worldwide projected to go up four to eight degrees Celsius by 2080, according to the study. It is these heat waves that may produce the most problems. “This points to the unexplored risks of changing climate on aviation,” said Radley Horton, a climatologist at Columbia University. “As the world gets more connected and aviation grows, there may be substantial potential for cascading effects, economic and otherwise,” said Horton, coauthor of the study published in the journal Climatic Change. Most studies so far have focused on how aviation may affect global warming (aircraft comprise about 2 per cent of global greenhouse-gas emissions), not vice versa. However, a handful of studies have warned that warming climate may increase dangerous turbulence along major air routes, and head winds that could lengthen travel times. The new study projects effects on a wide range of jets at busiest airports in the US, Europe, the Middle East, China and south Asia. The researchers estimate that if globe-warming emission continues unabated, fuel capacities and payload weights will have to be reduced by as much as four per cent on the hottest days for some aircraft. If the world somehow manages to sharply reduce carbon emissions soon, such reductions may amount to as little as 0.5 per cent, they said. For an average aircraft operating today, a four per cent weight reduction would mean roughly 12 or 13 fewer passengers on an average 160-seat craft. This does not count the major logistical and economic effects of delays and cancellations that can instantly ripple from one air hub to another, said Horton. Some aircraft with lower temperature tolerances will far worse than others, and certain airports – those with shorter runways, in hotter parts of the world or at higher elevations, where the air is already thinner – will suffer more. Benoit Pouliot Womens Jersey
Kerala airports handle more international passengers than domestic
The growth in India’s domestic air travel is among the key benchmarks the sellers of global commercial jets would keenly track. But, curiously, some airports in the peninsula cater to more international than domestic passengers, illustrating the traffic potential from the Gulf and the ASEAN cities in the South. Data from the state-run aviation property company Airports Authority of India (AAI) show that Kochi, Trivandrum, Kozhikode, and Tiruchirappalli hosted more outbound passengers than those travelling within the country in the fiscal year ended March 31, 2017. “These international airports have more international flights. Look at the case of Tiruchirappalli airport, which is connected by five international destinations directly, but only one domestic destination,” said Habeebullah Ubaidullah, a Trichy-based aviation analyst. This airport, with flights to Colombo and connected domestically to Chennai by ATR aircraft, has 14 narrow-bodied international departures per day with 15,078 weekly seat capacities and more than 90% of load factor. There are only three ATR local departures to Chennai. “Tiruchirappalli International Airport has clearly been neglected by Indian carriers and South East Asian airlines have benefited from that,” adds Ubaidullah. This trend is in sharp contrast to the passenger break-up at the nation’s two biggest cities and aviation hubs — Delhi and Mumbai — where domestic passengers outnumber those going overseas three to one. Delhi airport catered to 42 million domestic and 15 million international passengers in FY17: For Mumbai, home to Bollywood and India’s top bankers, the figures were 32 million and 12 million, respectively. Last fiscal, Indian airports catered to about 100 million domestic passengers and 59 million international passengers. Semyon Varlamov Jersey
24 global destinations: Can IndiGo digest Air India’s international operations?
After the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle approval for considering the “strategic disinvestment of Air India” and its “five subsidiaries”, IndiGo Airlines founder Rahul Bhatia was the first off the block to make an offer. Bhatia’s statement at the airline’s investors’ meet had three key takeaways. He wants to buy Air India Express, the national carrier’s low-cost airline that serves both domestic and Gulf destinations. He wants to take over Air India’s global operations after carving the international business out. Additionally, this reverse-engineering of the 2006 merger between Air India and Indian Airlines that fused international and domestic operations should come at minimal cost to IndiGo’s future. Bhatia said, “We simply do not have the ability or for that matter, the desire to take on debts or liabilities that could not be supported by a standalone restructured international operation of Air India.” At stake is Air India’s impressive array of international destinations, code-sharing agreements, and its Star Alliance membership that would make it a formidable acquisition for anyone looking to balloon with a single deal. IndiGo, which earns fewer revenues but more profits than Air India, operates to only six international destinations, none of them being lucrative European or North American ones. Air India, meanwhile, operates to 24 destinations across the world and has a prodigious frequency to certain cities. Air India flew twice daily to New York’s two airports, every day to Chicago, and thrice a week in winters to San Francisco. It operated 28 weekly flights in winters to London and flew daily to Birmingham, Frankfurt, Paris, and Italian cities. It operated 141 flights a week to cities in the Gulf region. IndiGo, meanwhile, is confined to operating in the South East Asian and Gulf region. Air India’s flights to Australia, Russia, and Japan too have very few domestic competitors and could be a shot in the arm for IndiGo’s global ambitions. In addition to new routes being added to any buyer’s arsenal, an airline like IndiGo also potentially benefits by having one less competitor on other shorter but lucrative routes. For instance, according to Air India, it operated 21 flights a week, or roughly three flights a day, to Singapore. On an average, IndiGo operates 11 flights every day between India and Singapore. Meanwhile, their competitor Jet Airways operates 12 flights a day, on an average, to the city nation. Similarly, Air India and Jet Airways operate two flights a day to Bangkok. IndiGo operates twice those flights on this route. In these routes, where new entrants like Air Asia are making rapid inroads, IndiGo’s inclination towards buying Air India’s international operations certainly looks like it is part of a long-term business strategy. Air India has 49 free flow and block space code-sharing arrangements with 16 airlines across the world This allows Air India to sell tickets from other airlines, which helps it reduce its costs and ensure travellers reach less-serviced destinations with ease. For instance, it has 12 of these code-sharing arrangements with Air Canada. In seven of these, Air India is the operating airline and Air Canada is the marketing airline. These arrangements allow travellers to book a single ticket and reach most of the big cities in Canada and some metropolitan airports of India aboard both these airlines. Air India’s code-sharing agreements allow its passengers to fly deep and to under-served airports. Its code-sharing agreement with the Ethiopian Airlines allows its fliers to fly to airports like Kigali, Entebbe, and Dare e Salam on a single ticket via Addis Ababa. Its code-sharing arrangements with the Turkish Airlines allows its passengers from India to fly to other Turkish cities like Antalya, Izmir, Ankara, Adana, and Dalaman the same way. If IndiGo decides to go through with acquiring Air India’s international operations, it would be almost at par with Jet Airways, which claims to have code-sharing agreements with 20 airlines. IndiGo’s Bhatia didn’t hold back his excitement for Air India Express while revealing his intentions to be a part of Air India’s divestment process. That’s probably because the Gulf route that is serviced by Air India Express has been the silver lining in the turbulence the national airline has hit. Air India Express clocked a profit of Rs 297 crore in 2016-17, its second consecutive profit year. The turnaround of Air India Express has been rather phenomenal. In 2014-15, it had posted a loss of almost Rs 62 crore. In 2013-14, its losses were almost Rs 345 crore. The low-cost airline that is run by Air India’s subsidiary, Air India Charters Limited (AICL), could add more than 300 flights to the Gulf every year to IndiGo’s kitty. This could help IndiGo match up to the might of state-run Middle Eastern airlines, some of which have strategic tie-ups with its competitors. Even though Air India Express has shown strong profits since 2015-16, the government is in no mood to run it. CCEA’s public announcement calls for a decision to consider the “demerger and strategic disinvestment of three profit making subsidiaries”. While carving out the airline’s international operations may help its divestment, the government may also have to decide how much of Air India’s debt should be taken over by any potential buyer. A look at the financial statements of Air India Limited, which operated only international flights before its merger with the erstwhile Indian Airlines in 2006, shows that its outstanding loans in 2005-06 amounted to Rs 3,622 crore. Certain entries suggest that Air India’s international operations were also putting loan write-offs belonging to the domestic Indian Airlines in its books. In Air India’s present debt, estimated to be above Rs 52,000 crore, this might just be a drop in the ocean. However, for IndiGo, it might be a small price to pay for Air India’s international operations that have been built up steadily and managed profligately over the years. Curtis Joseph Jersey
Indian-origin man proposes $6-bn cheaper Heathrow runway plans
An Indian-origin ‘wealthy’ businessman in the UK has submitted plans for a new third runway at Heathrow airport, claiming to lower costs by five- billion pounds, a media report said today. Surinder Arora, a hotel tycoon, has put his proposal to the government’s public consultation on Heathrow. Ministers have expressed a preference for the airport’s plans for a new runway and terminal costing 17.5 billion pounds, BBC reported. Heathrow said it was already considering some of the ideas, and wanted to lower the cost too, the report said. Arora Group’s proposals include changing the design of terminal buildings and taxiways, and reducing the amount of land it is built on, it said. Arora said: “We want passengers to be at the heart of our plans and the current monopoly at Heathrow, which over-charges airlines and in turn raises fares for passengers, is not the right model for the future. Heathrow needs competition and innovation which puts passengers and airlines at the heart of the expansion project”. “One of the options we have proposed to the government includes a possible shift of the runway so that it does not impact on the M25 and M4, as we know the M25 junction being affected threatens the deliverability of the whole project. “We appreciate this is a politically sensitive issue but it is merely an option with additional savings of 1.5 billion pounds, whereas the rest of our proposals save up to 5.2 billion pounds (USD 6.44 billion) without the need to amend the runway location,” Arora said. Willie Walsh, chief executive of British Airways’ owner IAG, welcomed the proposals and said: “The government should look closely at Arora’s proposal as it would significantly reduce costs.” Luke Kuechly Authentic Jersey
Airport Authority of India to seek nod to demolish old airport terminals
After getting the approval to expand the Chennai International Airport, The Airport Authority of India (AAI) is gearing up to apply to the public investment board for permission to tear own the old international terminal. AAI is planning to demolish old terminals and expand the airport to increase passenger capacity to 30 million per year. As a portion of the international terminal building is less than 15 years old, AAI needs permission from public investment board. The process will begin soon, says AAI officials. AAI has already started the paperwork to get approval from different bodies to demolish the building and prepare the land for fresh construction. The move is necessary because the old terminals do not have enough space and their design does not sync with the new steel and glass terminals which were built as part of airport expansion in 2013. The airport was shifted to Meenambakkam after a domestic terminal was commissioned in 1985. The international terminal was built in 1989. However, AAI opened an international departure building in 2003. “While the domestic terminal is old, the international departure terminal, which is not in use after the operations were moved to the steel and glass building, has more life. This requires permission for demolition,” said an official. Stephen Strasburg Womens Jersey