Air India sale: Jet Airways-led consortium to bid for debt-ridden national carrier

Air India sale: Jet Airways-led consortium to bid for debt-ridden national carrier

After the country’s largest budget airline IndiGo expressed interest to buy Air India’s international operations last year, a consortium led by full-service carrier Jet Airways along with European airliner Air France-KLM and US-based Delta Airlines has expressed interest in the disinvestment of national carrier Air India, according to a report.

Going ahead with the strategic disinvestment of debt-laden Air India, the government is expected to soon invite Expression of Interest (EoI) from the bidders. Last year, Turkey’s Celebi Aviation Holding and Delhi-based Bird Group had shown interest in buying state-owned Air India’s ground handling operations.

As per reports, the government is planning to split the airline into four entities – core airline business (Air India and Air India Express), regional arm (Alliance Air), ground handling and engineering operations. Each entity will be sold separately with at least 51 per cent stake on offer. The disinvestment process is likely to be completed by the end of 2018. Air India’s debt stands at Rs 51,890 crore.

Jet Airways’ possible bid for Air India by way of a consortium comes at a time when CEO Vinay Dube, without naming any manufacturer, said Jet hopes to order 75 narrow-bodied aircraft by March 31 in addition to 75 Boeing 737 MAX that the airline had ordered in 2015. The Naresh Goyal-led airline enhanced cooperation agreement with the Air France-KLM Group less than four months ago.

Interestingly, Jet Airways CEO Vinay Dube had a decade-long career at Delta Air Lines before joining the Indian carrier last year. Immediately before coming to Jet Airways, he was Senior Vice President (Asia Pacific) at the American airline. Air France-KLM and its partners Delta and Alitalia operate the largest Trans-Atlantic joint venture with over 270 daily flights.

Though Air India is saddled with huge debt, acquiring the airline can help boost the acquirer in terms of foot print, bilteral flying rights, parking slots, etc.

Last year in June, the Union Cabinet had approved privatisation of the debt-laden national carrier, which is kept afloat on taxpayers’ money. On January 10, in an attempt to fast-track Air India’s divestment process, the Cabinet allowed foreign airlines to invest upto 49 per cent in Air India.

A group headed by Finance Minister Arun Jaitley with Rothschild and Ernst & Young as consultants has been appointed to chalk out the strategy for Air India’s stake sale. The airline has six subsidiaries, out of which three are making losses, with assets worth about $4.6 billion. The government has pumped $3.6 billion since 2012 to bail out the airline.

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.”

AAI terminates licences for ground handling services at airports

New Delhi: The Airports Authority of India (AAI) has decided to terminate the licences for ground handling services at various aerodromes as part of implementing the new rules for such activities, according to a senior official.

Less than two months after the civil aviation ministry came out with the new ground handling services regulations, the AAI has decided to cancel the existing licenses given to such service providers and go for fresh tendering process. Under the new norms, domestic scheduled airline operators and helicopters can carry out ground handling on their own.

Confirming the move to terminate the existing licenses for ground handling services, AAI Chairman Guruprasad Mohapatra told that it has been done to “ensure a level playing field” for the ground handling agencies. AAI manages around 125 airports, including 78 domestic aerodromes and 26 civil enclaves.

“In order to implement the Ground Handling Services Regulations 2017 in letter and spirit, the AAI has taken a policy decision to terminate all existing licenses awarded for ground handling services at its airports and for inducting ground handling agencies through fresh tenders,” as per a communication.

This is one of the communications sent out by the AAI to a ground handling agency. Ground handling services include aircraft cleaning and servicing, loading and unloading of food and beverages, besides cargo and luggage handling at the airports.

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.

Address Infrastructure Crisis to Secure Aviation’s Future IATA

The International Air Transport Association (IATA) is calling for urgent attention to address infrastructure challenges in order to secure the industry’s future.

“Having the infrastructure to grow is vital to our industry’s future. But in many key places, it is not being built fast enough to meet growing demand. And there are worrying trends which are increasing costs. One of these is airport privatizations. We have not found the correct regulatory framework to balance the interests of the investors to turn a profit, with the public interest for the airport to be a catalyst for economic growth. All the optimism supporting strong aircraft orders will mean nothing if we don’t have the capability to manage traffic in the air and at airports,” said Alexandre de Juniac in his keynote address to the Singapore Airshow Aviation Leadership Summit (SAALS). The theme of the Summit is ‘Reimagining Aviation’s Future’.

De Juniac highlighted the lack of airport capacity in Jakarta, Bangkok and Manila as his top concerns in the Asia-Pacific region. “At the other end of the spectrum, we have Seoul’s Incheon Airport. They recently added runway and terminal capacity without raising charges for airlines and passengers. And, Incheon has extended an airport charges discount introduced two years ago. This sets a very positive example for other airports to follow. It also demonstrates great understanding of the role aviation plays in linking the Korean economy to economic opportunities globally,” said de Juniac.

“The Singapore government is also showing great foresight with its expansion plans for Changi Airport, including Terminal 5 (T5). But there are challenges. We must ensure the plans for T5 are robust enough to meet the high standards of airline operations and passenger convenience users of Changi Airport have come to expect. And we need to get the funding model right to avoid burdening the industry with extra costs. The prize to keep in sight is the airport’s contribution to Singapore’s overall economy,” said de Juniac. There have been reports on plans to introduce a tax on passengers and increases in charges to fund the construction of Terminal 5. The airline industry does not support pre-funding to finance in advance infrastructure projects.

Ensuring sufficient and cost-efficient infrastructure in Asia-Pacific is a top priority. The region is center stage of the industry’s overall growth. By 2036 we expect 7.8 billion people to travel (up from 4.3 billion expected in 2018). Of the 3.5 billion trips to, from or within the Asia-Pacific region in 2036, 1.5 billion will touch on China. As early as 2022 China will be the largest single aviation market. India is another emerging power-house—even if it will take longer to mature. And nearly equal potential could be realized as the Indian aviation market continues to develop.

In his keynote address, de Juniac also identified five fundamental areas that need to be protected when reimagining the industry’s future, the theme for SAALS:

Safety: “We had a stellar year in 2017. But there are always ways to improve—particularly as our data analysis capabilities grow. I would like to imagine a future for aviation with no accidents. We need to improve on safety, particularly as our data analysis capabilities grow,” said de Juniac.

Open Borders: “Aviation needs borders that are open to people and trade. The ASEAN single aviation market is an important development. I would like to imagine a future for aviation where airlines are as free as possible to meet the demands for connectivity. We must be a strong voice in the face of protectionist agendas,” he said.

Global Standards : “A common set of rules underpins the aviation industry’s success—in everything from safety to ticketing. And I would like to imagine a future where global standards continue to be strengthened by the cooperation of airlines and government through institutions such as the International Civil Aviation Organization and IATA,” said de Juniac.

Sustainability: “Our commitment to cut emissions to half of 2005 levels by 2050 is ambitious. And I would like to imagine a future where our net carbon impact is zero.” Industry and governments have agreed on a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) as one of its four pillars in a common strategy to ensure aviation meets this responsibility.

Profitable : “I would like to imagine a future where airlines generating normal profits is the norm, not a rarity.” 2018 is the ninth year of profitability since 2010, and the fourth consecutive year in which the return on invested capital is expected to exceed the cost of capital.

The Singapore Airshow Aviation Leadership Summit is co-organized by IATA, Singapore’s Ministry of Transport, the Civil Aviation Authority of Singapore, and Experia Events

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.