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.

Civil Aviation Minister lauds AAI for its achievements

Civil Aviation Minister Jayant Sinha has congratulated the Airports Authority of India (AAI) for its achievements in fiscal 2017-18.

Addressing AAI staff and their families during the 23th Annual Day celebrations of the AAI, Sinha said India is witnessing unprecedented growth in the aviation sector and requires skills to ensure a bright future.

He also felicitated Ahmedabad, Kolkata, Lucknow, Chennai, Pune and Indore airports for making their mark in the Airport Council International-Airport Service Quality Awards-2017.

The minister also felicitated the Dehradun, Udaipur, and Raipur Airports for making its mark in the CSI awards.

Sinha said, “What you have accomplished in the last one year, is nothing short of remarkable, it has been a fantastic year for the Airports Authority of India and you deserve a tremendous round of applause for the fantastic year. One of the very important things we did in the budget this year, and which I have been working with your leaders in the Airports Authority of India, is ‘How do we equip ourselves and prepare ourselves?’ and ‘How do we make sure not to accommodate 200 million passenger trips, but one billion passenger trips, that is the target we have to set for ourselves over the next 15 to 20 years.”

The Chairman of Airports Authority of India, Guruprasad Mohapatra spoke about AAI’s achievements in the last financial year.

He said, “We have not only excelled on the infrastructure front by dedicating several buildings at Gorakhpur, Belagavi, Hubli, Jammu etc to the nation, operationalising the central Air Traffic flow management to balance the demand and supply of the air and on the airports, cars isle system in Kolkata to reduce the difficulties faced by the travelling public due to fog and bad weather conditions, but came out with flying colours for providing customer satisfaction to the travelling public. I am elated to share that our continuous efforts towards improving passenger conveniences like the ambience at airports, clean toilets, local outlets at airports and providing sanitary pad dispensing machines, and many more such initiatives, have not only transformed the airports, but has changed the public perception. These efforts have placed us among some of the best airports across the world.”

The evening was marked by dazzling performances by the famed Zenith Dance Group. They thrilled the audience with an acrobatic and energetic dance performance on the Ganesh Vandanam.

The event then soon took a lighter note as famous comedian, Rajeev Nigam, tickled the funny bone of the audience with his standup comedy.

Finally, Bollywood singer Benny Dayal took centre stage with his soulful voice and got the audience on their feet with his energetic dance numbers.

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.

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.

Air Safety is Priority, Says Amber Dubay India Head of Aerospace and Defense, KPMG in his interview

Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, tells us that with spread of aviation across the country through the government’s ambitious Regional Connectivity Scheme (RCS), the challenge of enhancing safety structures and procedures has increased manifold

India is on a modernisation spree of its aviation sector. What are the challenges regarding safety issues?

Safety challenges will remain the same despite growth in aviation. Some of the main factors include ensuring airworthiness of aircrafts in operation and maintenance of other equipment (ground equipment, navigation equipment, etc.), keeping cognizance of human performance limitation, ensuring maintenance of security processes and ensuring adequate communication amongst all aviation stakeholders.

The real issue that India is experiencing, thanks to the high growth phase in traffic, is that adequate structures and procedures are yet to be build to deal with the scale of errors and violations that would occur. Oversight of the aforementioned activities would have to become more robust in order to ensure safe operating levels.

Ensuring safety assurance at the level of all operators along with requisite oversight by regulatory authorities (Directorate General of Civil Aviation [DGCA] and Bureau of Civil Aviation Security [BCAS]) is the challenge. This challenge is enhanced manifold with the spread of aviation across the country through the government’s ambitious RCS initiative.

How is the challenge being addressed by different stakeholders in India?

The challenge of dealing with this kind of growth is not intrinsic or restricted only to India. There are adequate procedures and guidance available globally to act as reference points for India.

The stakeholders (Ministry of Civil Aviation [MoCA], regulators, Air Navigation Service [ANS] providers, airline operators, and Maintenance, Repair and Operations [MRO] operators) have taken up the task of addressing the safety issue within their own spheres of operation.

An example of this is the effort being undertaken by stakeholders towards implementation of GPS Aided Geo Augmented Navigation (GAGAN). Developed by Indian Space Research Organisation (ISRO) in conjunction with Airports Authority of India (AAI), GAGAN provides highly accurate satellite-based guidance to aircrafts and obviates the requirement to have ground-based navigation equipment. This coupled with Automatic Dependent Surveillance-Broadcast ADS-B (Out) will push the safety envelope across not only India but also across most parts of Africa and Asia.

The International Civil Aviation Organization (ICAO) conducted a 10-day audit of India’s aviation regulator in November. It placed India in its list of 13 worst-performing nations in terms of air safety in 2012. Will India fare any better this time? We believe MoCA and DGCA are taking adequate steps to address the adverse findings of previous ICAO reviews. Things may get better with time. Once 90 percent of DGCA processes become automated and online, it will free their bandwidth for more extensive field inspections, without going overboard. That may lead to a better oversight of adherence to safety norms.

How is the rapid modernisation straining safety issues?

More than rapid modernisation, the increased utilisation of aircrafts, airport infrastructure, non-availability of skilled manpower, etc., are straining safety structures.

Even though such growth is highly welcome, its quantum was not foreseen. As a result, the internal safety control and safety assurance structures of the operators along with regulatory oversight structures are over-stretched. It needs to be addressed on priority. Any unfortunate incident involving loss of lives can set Indian aviation back by five to ten years.

How far is the institutional and regulatory framework geared up to implement a robust safety system in Indian aviation?

The DGCA is undertaking a comprehensive review of the regulations to ensure relevance and practical implementation.

BCAS has also taken steps to ensure a seamless travel experience while maintaining security standards. The removal of hand baggage tags is welcome. We may soon shift to biometric checks and paperless travel. Even immigration checks may go digital.