VRS, ESOPs on the cards for Air India employees: Jayant Sinha

MoS (civil aviation) Jayant Sinha said the disinvestment is designed to ensure integrity and confidentiality at every stage of the Air India sale

New Delhi: The government will take a host of steps to protect the interests of Air India employees after the sale of a 76% stake in the national carrier, the details of which are being worked out in talks with staff unions, minister of state for civil aviation Jayant Sinha said in an interview.

The minister also said that the disinvestment, expected to be consummated by September, is designed to ensure integrity and confidentiality at every stage of the Air India sale.

The employee protection plans under consideration include a voluntary retirement scheme (VRS), an employee stock option (ESOP) scheme, a government-funded scheme to meet the medical expenses of retired employees and settlement of past dues from the merger of Air India and Indian Airlines.

“Now that the disinvestment process has kicked off, we have started formal negotiations with various worker unions including multiple pilot unions, cabin crew unions and engineers’ union. In consultation, we will determine the right level of protection and who should bear the cost. It is possible some employee protection cost may be provided by the government,” the minister said, adding that one example is the medical expense of retired employees.

The period of protection for employees from the date of consummation of the transaction as well as the terms of VRS will be given in the request for proposal (RFP).

“There are two parts to a VRS. One, how long the employee will be protected after the transaction closes legally. We are still a year away for the transaction to close. The second issue is the terms of the VRS. Those are some of the things we are looking at right now.” said Sinha.

Employees will be offered ESOPs from the government’s residual stake of 24%.

“The principle is that every employee should feel she has a significant material stake in the company’s future prospects,” the minister said.

The government will also settle the back wages of employees specified by a panel, amounting to Rs1,298 crore, prior to the transaction. The minister said that Air India’s head count of about 11,000 permanent employees is within industry standards. About 37.6% of employees will be retiring in the next five years, Sinha said, adding that it would not be correct to say that employee cost of Air India is in any way out of line with industry benchmarks.

Policymakers have taken special care to ensure that the divestment process is above criticism. “There is sufficient oversight at every stage by different committees so that both the integrity and confidentiality of the process is fully protected at all times,” said Sinha. Although an independent valuer will give a reserve price for the Air India stake on sale, it will be kept confidential from everyone till the bids are open, as is the standard practice.

“Reserve prices are never made public before bids are open. It is illogical to do so,” a former secretary to the government, who has headed the disinvestment department, said on condition of anonymity.

Sinha clarified that only interest-bearing debt of Rs24,576 crore will remain with the companies after the stake sale. This was decided based on the sustainability of the enterprise going forward, what is backed up by collateral and what is fair for the successful bidder to hold.

Sinha also said that any non-aviation company meeting the eligibility criteria could also bid for the company. “Air India has the expertise to run an airline as it does today. What we need is an investor with the necessary management and financing expertise,” he added.

Industry watchers said disinvestment is likely to make the national carrier more competitive. “Privatization is likely to improve operational efficiency of Air India, thereby helping it compete more effectively and help build sustainable profitability,” said Kinjal Shah, vice-president of corporate ratings at credit rating agency Icra Ltd.

The government is also on a massive infrastructure expansion programme in line with the growth in air travel. “Today people are taking 250 million trips a year. We are planning for a billion trips a year over the next 15-20 years and various experts have indicated that the investments needed for it would be about Rs3-4 trillion,” said Sinha.

Air India sale: Not just Tatas, foreign airlines should also be allowed to bid for the ailing aviation company

New Delhi: Air India’s disinvestment could become something of a farce if the government decides to restrict it to Indian buyers alone. There has been a view within some sections of the government that equity stake in the airline should be bought only by Indian entities and that foreign investors/airlines should be kept out. If that happens, then the sale process could be stymied.

A source close to development said that apart from Air India’s former owners, the Tatas, some Gulf Airlines only seem to be interested in acquiring a stake. “If the foreign airlines/investors are kept out, then it will become almost like a closed sale, with only the Tatas as potential bidders,” this person said, adding at least one successful private domestic airline which many believed would also like to put in a bid has already said in “aviation circles” that it was not keen. And industrialist Anand Mahindra, who is a former independent director on Air India’s board, has also brushed off any talk of investing in the national carrier. As the list of possible suitors for Air India narrows, perhaps the government needs to expand its view on foreign investors.

Remember, India lifted restrictions on foreign airlines acquiring equity in Indian carriers in 2012 when it allowed up to 49 percent equity by foreign airlines. This prompted the Tatas to partner two entities and consequentially launch two separate airlines – Vistara with Singapore Airlines and AirAsia India with AirAsia BhD – from scratch in India. Also, Etihad Airways picked up 24 percent stake in Jet Airways. The restrictions were eased further last year and as of today, a foreign airline can pick up 100 percent in an Indian carrier, in association with a foreign investor.  Qatar Airways has been circling India for a possible airline venture for sometime now.

Representational image. Reuters

Coming to the possible Tata bid, are the Tatas really interested in once again becoming the owners of Air India? Tata Sons has maintained that it would not offer any comments on such “speculation” but has refrained from denying reports that the group was approached by the government last month for any interest in the disinvestment process of the national carrier. The person quoted above said since the government is still not clear on various aspects of the sale, there is no proposal from the Tatas as of now. “They would need numbers, facts and an assessment of liabilities and assets. The government is yet to make up its mind on how much equity to divest, what to do about profitable subsidiaries and how to deal with the debt. No proposal will come till these vital issues are decided”.  Remember, the ministry of civil aviation wants the government to drop plans of a sale and instead revive Air India!

The person quoted above also wondered if the Tatas were to actually buy Air India and turn it around, what stops the government from again nationalising it? This script is not new, nor is the fear of arbitrary government decisions. In 1953, a profitable Air India was nationalised because an airline was equated with national prestige and the government of the time did not want profits to continue flowing to private parties. Though J R D Tata was continued as the AI chairman even after nationalisation, he was abruptly removed in 1977. What if there is a repeat of this, if the Tatas were to turn the ailing Air India profitable in some years?

Meanwhile, in its meeting yesterday, the Union Cabinet decided to constitute a Group of Ministers (GOM) to decide the modalities of disinvestment in Air India. Announcing this, Finance Minister Arun Jaitley said that he will head this GoM, which will comprise Civil Aviation Minister A Gajapathi Raju besides some other ministers. It is obvious from this statement that though Jaitley had announced the government’s intent to disinvest Air India some months back and then followed it up with an informal proposal to Tata Sons to pick up stake in the airline, the entire disinvestment process is moving slowly.

The three options on the table before the GoM are a 100 percent sell-off, a 74 percent stake sale or a 51 percent stake sale. This means in any scenario, the government will cease to be a majority owner of the airline. Another official close to developments had said earlier that it is possible to break up the airline into two distinct parts. One is the airline itself with aircraft and related assets. The second part comprises Air India’s subsidiaries and the real estate. This official had said that the sensible way to get maximum value in this disinvestment process would be to sell off just the airline to a prospective buyer. The government could then simultaneously dispose off the subsidiaries and real estate for a total consideration of close to Rs 20,000-21,000 crore.

This official had said that the sale of standalone Air India can happen only if any prospective buyer agrees to bear about Rs 20,000 crore of aircraft loans and another Rs 6,000-7,000 crore of working capital loans. “The current market value of aircraft is higher than the loans. And of the Rs 30,000 crore total working capital loans, the bidder may be asked to take on only Rs 6,000-7,000 crore. In return, the buyer gets a fleet of 43 owned aircraft, valuable domestic and international slots (for which buyers are usually willing to pay a premium), parking bays etc,” this person said.

But why should the government write off the remaining debt on Air India’s books? This person said the government may not need to write off any large amount, if the airline is broken up and subsidiaries sold separately. Air India has five subsidiaries: Air India Charters Ltd, Air India Transport Services Ltd (ground handling subsidiary), Air India EngineerinG Services Ltd (MRO subsidiary), Hotel Corporation of India and Alliance Air.

Indian airlines to add new jets in booming aviation market

Hyderabad: Indian airlines Jet Airways (India) Ltd, SpiceJet Ltd and AirAsia India are planning to add new jets to their fleets as they look to expand in the world’s fastest-growing aviation market, the carriers said on Thursday, March 8 2018.

Domestic Indian passenger traffic increased by 17.9% in January from a year earlier, marking the 41st consecutive month of double-digit growth, the International Air Transport Association said in a monthly update released on Thursday.

Civil aviation secretary Rajiv Nayan Choubey said as long as oil prices remained below $80 per barrel, he expected the Indian aviation market to grow at a compound annual growth rate of 15% for the next 20 years or so.

“We are committed to ensure that new airports are built, better air space management services are provided, so that there is no congestion in the skies,” Choubey said at the Wings India airshow.

Indian airlines are scrambling to add more jets to meet demand for more domestic and international flights, making it one of the most targeted sales markets for jet manufacturers Airbus SE and Boeing Co.

“The growth of the domestic Indian (aviation) market is the highest in the world,” said Dinesh Keskar senior vice president of sales (Asia Pacific and India) at Boeing. “Every segment of traffic in and out of India is going to grow for the next 20 years.”

Boeing said in July it expected Indian airlines to order up to 2,100 new aircraft worth $290 billion over the next 20 years, calling it the highest-ever forecast for Asia’s third-largest economy.

Jet Airways hopes to close a deal to buy another 75 narrow-body jets by the end of March, its CEO Vinay Dube told reporters on the sidelines of the airshow. The airline last year finalized a deal to buy a separate 75 Boeing 737 MAX aircraft and said it was in “serious talks” for 75 more.

Dube said it would finalize the deal with one of the plane manufacturers, alluding to Boeing or Airbus.

AirAsia India is looking to expand its fleet to 60 jets from the current 14 over the next five years, a spokeswoman said. The airline’s parent, AirAsia Bhd, said in January it was considering an IPO of the Indian arm.

Indian low-cost carrier SpiceJet said in July it had signed a provisional deal to buy 40 Boeing 737 MAX 10 jets.

IndiGo to decide which all domestic flights to shift at Delhi airport within 10 days

New Delhi: Ending the over year-long imbroglio, low cost carrier IndiGo, on 24 Jan 2018 Saturday said it will move some of its domestic flights from Delhi Airport’s terminal 1 to T2. The Supreme Court had on Friday refused to grant relief to IndiGo in Delhi Airport’s decision on shifting flights.

“IndiGo deferentially accepts the decision of the apex court and shall implement the order in the coming weeks, in close coordination with Delhi International Airport Limited (DIAL),” IndiGo said in a statement. An airport official said IndiGo will submit a proposal by March 3 and then DIAL will respond to the same by March 13. As per the SC Friday order, shifting of flights should happen within 24 days.

IGI Airport’s T1 has to be decongested so that its expansion work can begin. GoAir (which has only domestic operations) had already shifted all its Delhi flights to T2 last October. DIAL wanted to shift IndiGo and SpiceJet flights between Delhi and Mumbai, Kolkata and Bengaluru from T2 only. Now which all flights are shifted remains to be seen.

T1 has a capacity of handling 2 crore passengers annually but is expected to handle 2.6 crore flyers the financial year ending March 31, 2018, explaining the serious overcrowding here in peak hours. DIAL plans to expand its capacity to 4 crore passengers per annum by 2020-21 but the work, it says, can begin only after one-third flights move out of T1. The expanded T1 will have 22 aerobridges apart from 15 boarding gates from where flyers will take buses to planes.
Now with airlines agreeing to shift, the much-delayed expansion work of IGIA may finally begin.

The IndiGo statement issued Saturday said: “By its order dated February 23, 2018, the Supreme Court of India has declined to interfere with the judgment of the Division Bench of the Delhi High Court, which upheld the decision of DIAL to shift one-third of IndiGo’s operations from Terminal 1 to Terminal 2 of IGI Airport, New Delhi.”

IndiGo’s engine nightmare: 3 in-air failures, 69 replacements in 18 months

India’s largest airline IndiGo, which flies four out of every 10 Indians, has had to replace Pratt & Whitney engines on its 32 A320 Neo aircraft at least 69 times in the period May 2016-November 2017. This is an astonishingly high number that raises a question mark over passenger safety in Indian skies. On an average, a fleet of 100 aircraft requires about 40 such engine changes/replacements in a 3-year period.

IndiGo says these are related to non-detection of chip, carbon seal lining or combustor chamber lining in Pratt & Whitney 1100 series engines. The airline calls these engine ‘glitches’ and ‘non-safety’ issues. Indigo’s boroscopic tests (which are used to test defects or imperfections through visual inspection by a boroscope of aircraft engines and gas turbines, etc) detected these anomalies in 69 instances. As per practice, the defective engines were replaced with other engines. Such engine replacement is typically done overnight. After the replacement, the defective engine is sent to the manufacturer to fix the problem. The planes continue to operate with the replaced engines.

However, that’s the least of IndiGo’s problems as it has had graver issues to deal with. Over the past 18 months, IndiGo has had three instances of one of the two engines of the aircraft shutting down. The aircraft landed safely powered by the second engine. Those engines have been replaced and the aircraft are back in the air.

Over the past 2 days, however, its Pratt & Whitney PW4500 series engines have reported issues related to vibration. However, the manufacturer advised all airlines around the world to ground such planes which have both PW4500 series engines. Indigo had 3 such planes out of the 11 such planes worldwide. These planes are grounded and one of the PW4500 engines is being replaced in each of these aircraft.

IndiGo has been struggling with the Pratt & Whitney engines in the newest A320 Neo aircraft ever since they were first inducted in February, 2016. Greg Hayes, chairman of Pratt & Whitney’s parent UTC, responded to the issue in the post-earnings call in September, saying the company remains, “on track to certify a combustor upgrade to incorporate into new engines.”

Yet, it is the continuing problems with the engines that raise concerns regarding passenger safety in Indian skies. Especially, when it comes to India’s biggest airline.

Airbus To Demo Skyways Drone

A live demonstration of a parcel delivery drone will take place today in Singapore. Airbus Helicopters will show how the Project Skyways UAV can hover while picking up a parcel, and then set off to make the delivery. The demo will take place on the National University of Singapore (NUS) campus. Another example of the Skyways drone can be found on the Airbus stand here at the show.

Project Skyways is one of four urban air mobility initiatives that Airbus is pursuing. The second is CityAirbus, a multi-passenger, self-piloted battery-powered VTOL vehicle being developed by the company’s E-Aircraft Systems unit in Europe. The third is Project Vahana, another VTOL passenger transport being pursued by A3, the Airbus outpost in Silicon Valley, California that is also known as A-Cubed. The fourth is an exploration of 10 relevant technologies being conducted from Shenzhen in China by Airbus and HAX, an early-stage investor in hardware start-up companies.

In Singapore, Airbus (Stand J23, Chalet CD17) has partnered with Singapore Post (SingPost) and the Civil Aviation Authority of Singapore (CAAS, Chalet CS12, Stand A01). The aim is to develop a safe and economically viable unmanned parcel delivery system for use in urban environments.

SingPost is bringing expertise in eCommerce logistics and delivery networks. “Our trial will involve SingPost’s parcel locker technology…and our long term plans…that involve drones and the vertical dimension,” said SingPost managing director Mervyn Lim.

In Europe, meanwhile, the CityAirbus demonstrator is progressing toward a first flight by the end of this year. It is an all-electric machine with 100 kW Siemens motors and four ducted propellers, that can carry up to four passengers over congested cities “in a fast, affordable and environmentally friendly way,” according to Airbus Helicopters. The propulsion system is now being tested at the company’s ground facility at Taufkirchen, Germany.

Airbus told that the first flights of the CityAirbus will be unmanned and include automatic takeoff and landing and flying along predefined routes. A ground-based pilot will be able to take control if necessary. Fully autonomous flight will be demonstrated later in the program.

Meanwhile, the first flight of the Vahana electric VTOL aircraft occurred a week ago at a UAS range in Pendleton, Oregon. It lasted 53 seconds and the machine rose 16 feet before descending safely. “In just under two years, Vahana took a concept sketch on a napkin and built a full-scale, self-piloted aircraft,” said Zach Lovering, the project executive for A3. “It proves that we can deliver meaningful innovation…to provide a real competitive advantage for Airbus,” added Rodin Lyasoff, CEO of A3.

A-Cubed is the company that Airbus chief Tom Enders set up in May 2015 to tap new technology and innovation in the U.S. He appointed former MIT, DARPA and Google employee Paul Eremenko as the first CEO. Lyasoff, a fellow tech pioneer and drone specialist, joined him. Within a year, Enders had moved Eremenko to Europe as the chief technology officer for Airbus, a move that caused some controversy and internal dissent with Airbus. Lyasoff became the head of A-Cubed. Late last year, Eremenko departed Airbus and returned to the U.S. as chief technology officer for United Technologies.

Although the CityAirbus and Vahana projects appear to be duplicative, Airbus told that they are complementary, and that regular exchanges have taken place between the two engineering teams.

Airbus also told us that discussions have taken place with a number of cities, including Singapore, that have expressed their interest in innovative, electrically-powered VTOL systems.

India remains fastest growing domestic aviation market in 2017: IATA

India remained the world’s fastest growing domestic aviation market for the third straight year in 2017 as economic and network expansion bolstered the sector, according to global airlines’ body International Air Transport Association (IATA).

Globally, Revenue Passenger Kilometres (RPKs) — a measure of passenger volumes — rose by 7.6 per cent in 2017, registering “above-trend growth” that was ahead of the ten- year average rate of 5.5 per cent.

“The domestic India market posted the fastest full-year growth rate for the third year in a row (17.5 per cent), followed by China (13.3 per cent),” IATA said in a report released last week.

The grouping noted that such growth rates were driven mainly by the comparatively strong rates of economic expansion seen in each country, as well as stimulus from additional airport pairs being offered.

Such new services translate into time savings for passengers and have a similar stimulatory impact on demand as cuts in airfares, it added.

“India posted the fastest domestic RPK growth for the third year in a row, driven by economic and network expansion,” the report said.

In December also, India registered the highest growth rate of 17.4 per cent.

Many Indian carriers have embarked on ambitious expansion plans and local airlines have placed orders for over 900 aircraft.

Since late 2014, lower airfares have helped in boosting passenger growth — which in 2017 was also supported by broad-based pick-up in global economic conditions.

This year, IATA said that full-year RPK growth is expected to slightly slower than recorded in 2017.

“This is mainly because increases in airline input costs – notably fuel prices but also labour costs in certain countries – mean that we are unlikely to see the same degree of demand stimulation from lower airfares in 2018 than we have in recent years,” the grouping said.

IATA represents some 280 airlines comprising 83 per cent of global air traffic.

India World’s Third Largest Growing Domestic Aviation Market, Says Economic Survey

During the 2007-08 to 2016-17 period, domestic passenger traffic registered a compound annual growth rate (CAGR) of 9.89 per cent

New Delhi: With the civil aviation sector witnessing “considerable progress”, India has become the world’s third largest domestic aviation market in terms of the number of tickets sold, according to the Economic Survey. To connect unserved and under-served airports, the government has come out with regional connectivity scheme UDAN (Ude Desh ka Aam Naagrik) and flights on many routes have commenced under this initiative.

“India is the 3rd largest and the fastest growing domestic aviation market in the world in terms of number of domestic tickets sold. In 2016-17, annual growth in domestic passenger departures was 23.5 per cent as compared to 3.3 per cent in the US and 10.7 per cent in China,” said the Survey tabled in Parliament today.

During the 2007-08 to 2016-17 period, domestic passenger traffic registered a compound annual growth rate (CAGR) of 9.89 per cent.

“There has been considerable progress in Roads, Railways, Metro Rail, Shipping, Civil Aviation, Power and Logistics Infrastructure Sectors that is expected to step up the growth momentum in the short term,” it noted.

With respect to revival of airstrips and airports, the Survey said that would be “demand driven” and would depend on the firm commitment from airline operators as well as from respective state governments.

“Provision of Rs. 4,500 crore for revival of 50 unservedvand under-served airports/ air strips has been taken up with budgetary support of government to be completed by December 2018,” it said.

In the current fiscal till September, domestic airlines carried 57.5 million passengers, a growth rate of 16 percent over the year-ago period.

During this period, scheduled Indian and foreign carriers ferried 29.2 million passengers to and from India — a growth of 9 per cent compared to the same period a year ago.

“During this period, the domestic air cargo handled was 0.61 million MT showing a growth of 10.27 per cent over the corresponding previous year time period, and international air cargo handled was 1.07 million MT showing a growth of 19.02 per cent,” the survey said.

Airport bids to get attractive as government decides to fix fees first

NEW DELHI: Developers of new airports will have certainty on the aircraft landing and parking fees they can levy, as the government has decided to fix the rates before inviting bids.

The decision will help attract foreign investment as it will eliminate a major regulatory uncertainty that discouraged investors to vie for airport projects in India, aviation industry experts said. Airline executives also welcomed it, saying they will have more visibility on a key recurring cost.

Currently, the Airports Economic Regulatory Authority (AERA) decides the fees at privately run airports. Airport operators and airlines often have complained about tariffs and at least in one instance the Supreme Court had to intervene to implement a rate revision.

“We have the approval from the Union Cabinet to amend the AERA Act, which will allow us to decide charges prior to the bidding of the airport project,” said a senior aviation ministry official.

The ministry is still working on the procedures to fix the fees in the pre-bid stage, he said.

The proposed rule will be prospective in nature, and AERA will continue to decide tariffs at airports that are currently in operation or where the projects have already been awarded, the official said.

New airports at Jewar in Greater Noida and Pune are likely to be among the first to be bid out under the proposed rule.

The decision will make the airports sector attractive to foreign investors, said Satyan Nayar, secretary-general of the Association of Private Airport Operators.

Foreign investors see regulatory uncertainty as the biggest challenge in the Indian market, he said, adding: “Fixing tariff prior to bids would take care of regulatory uncertainty andhelp give a boost to foreign investments in the airports sector in India.”
About $45 billion is estimated to be required to develop airport infrastructure in the country, Nayar said. “A substantial percentage (of this) will come through foreign investments.”

Airlines said bidding for airports on tariffs would bring relief for passengers and airlines. “This would be a good move as it would bring respite from sudden increase in charges at private airports. However, the government should ensure that the charges keep falling every year,” said an airline representative.

Airlines and passenger bodies have often criticised the charges at Delhi, Mumbai, Hyderabad and Bengaluru airports as high. Airport tariffs are fixed by AERA for a duration of five years, known as the control period. In Delhi, the airport operator moved the AERA appellate authority against AERA’s order asking it to cut the charges from 2014, claiming that it would result in losses. The revision was finally implemented in 2017 on a Supreme Court order, after national carrier Air India petitioned it.

Helicopter Flights Coming Under Udan Scheme, Says Civil Aviation Minister

State-run Airports Authority of India have issued “Letter of Awards” for 90 proposals involving around 325 regional connectivity routes which were received under the second round of the Udan scheme

NEW DELHI: The government today awarded contracts to 15 firms to operate flight and chopper services under the second round of its air regional connectivity “Udan” scheme.

State-run Airports Authority of India (AAI), the implementing agency of the scheme, issued “Letter of Awards” for 90 proposals involving around 325 regional connectivity routes which were received under the second round of RCS-Udan.

Subsequently, under the second phase, flight operations are expected to connect destinations like Kargil, Darbhanga, Pakyong (Gangtok) and Cooch Behar.

“Udan-II has addressed the problem of (air connectivity in) difficult areas (which are) basically areas with hilly tracks, where road connectivity is low or probably has no train connectivity,” Civil Aviation Minister Ashok Gajapati Raju said at an event held here.

“We will connect 29 unserved airports, 13 underserved airports to 36 served airports and 31 helipads. This is the first time that helicopter (services) are coming under Udan,” he said.

According to the minister, Udan-II will connect 43 airports and helipads in priority sectors like the north-east and the hill states.

Mr Raju said 17 applicants, including airline and chopper companies, had sent their proposals for a total of 502 routes in the second phase of the scheme. In total, 73 unserved or underserved airports and helipads will be provided services through the second phase.

The ministry awarded new routes to SpiceJet, IndiGo, Jet Airways, Turbo Megha Airways and Pawan Hans, among others.

SpiceJet Chairman and Managing Director Ajay Singh said, “We see tremendous potential in the routes that we have been awarded today and look forward to beginning operations very soon.”

SpiceJet has been awarded 17 proposals and 20 new sectors under the second round of bidding.