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.

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.

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.

Jet cockpit fight: DGCA suspends flying licence of both pilots for five years

New Delhi:  The two pilots who fought in the cockpit of a Jet Airways London-Mumbai flight of January 1 will no longer be able to operate as pilots for any airline for five years. In an unprecedented action, the Directorate General of Civil Aviation (DGCA) has suspended their flying licences for five years for endangering safety. The cockpit was left unmanned more than once during the fight when the co-pilot went out to bring back the lady commander who was sobbing in the galley and possibly afraid of going back to fly with him.

“DGCA has investigated the occurrence. Keeping in view serious safety lapses endangering the safety of aircraft operations, DGCA has suspended the privileges of license of the both the involved pilots for a period of five years,” DGCA chief B S Bhullar told.

The aircraft on which the fight was witnessed had 324 passenegers and 14 crew members.The regulatory action comes a fortnight after Jet sacked these two pilots. Now with the DGCA suspending their Commercial Pilot Licence (CPL) for five years, they cannot even get a job as pilots in any other airline.

Flight 9W 119 of January 1 was operated by two commanders. Jet’s senior most Boeing 777 commander was flying as co-pilot and his deputy was the commander of this flight. The “co-pilot” had allegedly slapped the lady commander and then the cockpit was left unmanned on two occasions when he went out to bring her back in. Soon after the incident was reported, the DGCA had suspended the co-pilot’s flying licence. Later Jet had sacked the pilots.

For in-flight Wi-Fi, airlines likely to charge 30% of fare

  • Officials said the charges for net connection might range from Rs 500 to Rs 1,000 for thirty minutes to an hour as per international standards
  • Airlines have to pay service providers like Inmarsat and others a hefty sum to activate in-flight net connectivity

CHENNAI: Travellers could soon be able to post a selfie on social media while on board a plane, but may have to shell out at least 20-30% of the fare to avail of in-flight data connectivity.

Airlines are considering options to introduce the facility following a Trai order permitting in-flight voice and data connectivity+ . The move may help airlines add value to services for business class travellers on domestic and international routes. It may not be an option for low-cost carriers.

Officials said the charges for in-flight net connectivity would range from Rs 500 to Rs 1,000 for thirty minutes to an hour, according to international standards and taking into account the charges levied by service providers for slots on satellites. Airlines have to pay service providers like Inmarsat and others a hefty sum to activate inflight net connectivity.

With advance booking fares starting from Rs 1,200 to Rs 2,500 on short domestic routes, in-flight internet connectivity may be too expensive for passengers and airlines in the domestic sector.
An airline official said that Trai’s order permitting in-flight net connection would be an advantage for flights that traverse the peninsula on intercontinental routes. These flights do not have to switch off the Wi-Fi when in Indian airspace, he added.

“We are discussing the feasibility of having the facility on domestic flights. The cost and demand may have to be factored in before taking a decision,” said an official of a private airline. Airlines will have to install antennae on planes based on how they decide to receive and send the signals, either over mobile towers on the ground or over satellites.

Frequent travellers say that except for a handful of business travellers, there are no takers for in-flight internet even on international routes.

Air Passengers Association of India national president D Sudhakara Reddy said, “The in-flight data connectivity may be useful on longhaul flights. But I have hardly seen anyone use it or ask for it on international routes. It may be good during an emergency. Going by the international experience of passengers, it may not be viable for low-cost carriers.”

Some airlines allow passengers to use Wi-Fi free of charge for WhatsApp and other messenger services which may not need much bandwidth. Lufthansa, Emirates, British Airways and Delta are among the airlines that offer the service on international routes.