UB in talks with banks to release pledged shares

The UB group, which owns Kingfisher Airlines, has started discussions with banks to possibly avert the impending liquidation of mortgaged assets or minimise the impact of lenders’ move to recall loan given to the airline.

“We have received no formal communication from the banks till date. We are in continuing discussions with them on ways to bring down their exposure, inter alia, from the proceeds of the Diageo transaction,” the UB group says in a statement.

“The banks explicitly support the transaction with Diageo, and would work with us in finding an orderly method of disposal of some of the pledged shares to Diageo if appropriate,” the statement adds.

On Tuesday, a consortium of 17 lenders, led by State Bank of India (SBI), considered recalling the Rs.7,000 crore loan advanced to Kingfisher as the airline’s promoters could not come out with any credible plan for revival.
With the Kingfisher Airlines brand (valued by Grant Thornton for Rs.4,100 crore), which has been mortgaged with the banks, unlikely to yield any value, the banks are pinning their hopes on the hypothecated shares of UB group companies, namely, United Spirits and United Breweries Holdings to recover as much as possible.

Analysts are divided whether the banks will resort to offloading the pledged shares in the open market affecting the Diageo deal.
http://www.thehindu.com/business/Industry/ub-in-talks-with-banks-to-release-pledged-shares/article4418714.ece

Centre may have to open a cash tap to keep AI runnin

 Air India may have delivered significant improvement in its operational and financial performance in the past few quarters, but the existence of several structural issues, unless addressed, would upset the applecart, says global aviation consultancy Centre for Asia Pacific Aviation (CAPA) in a detailed report on the national carrier.

“Turnaround efforts are hampered by poor asset utilisation and low labour productivity. A comprehensive review of the business model is required across domestic, regional, international and long-haul operations as there are fundamental weaknesses in each of these domains. The management is faced with huge internal challenges, a fast changing external environment and excessive government intervention,” CAPA says.

FDI, a competition
The significance of this critical analysis is that it comes in the wake of the government allowing foreign airlines to pick up stake in Indian airlines.
CAPA says that turning around a national carrier today is more difficult than it was ten years ago because the environment has changed so dramatically.
“But it is possible if the political will exists to take tough decisions, a feature which has been absent to date. If Air India is financially and operationally restructured, it should subsequently be granted a level-playing field with respect to accessing foreign airline investment,” the aviation think tank says.

As long as Air India struggles under government ownership, it would continue to drive distortions in policy, deterring valuable investment.
Given the critical role that aviation plays in enabling economic development, such distortions are not in the national interest, it says.

Lacuna in framing policies
Highlighting the lacuna in framing policies and political interference, CAPA says “the decision to strengthen Air India Express’ base in Kerala appears to be a politically rather than commercially driven decision. It would be a strategic mistake to focus primarily on Kerala and neglect other important markets across India, leaving them open for Indian or foreign LCCs to develop their own fortresses.”

It says, the combination of stronger Indian competitors, as a result of foreign airline investment, the growth of LCCs, the opening up of the international market and the changing nature of global alliances will impact every aspect of Air India’s operations.

“The pace of change in the market is so rapid that it puts into question the validity of the turnaround plan that has been developed for Air India. The government may have to open a cash tap to keep national career flying in the coming years.”

“Without decisive (and in all probability painful) action, the government could be faced with unthinkable funding requirements for Air India.”

“Apart from drip feeding billions of dollars to finance operating deficits, fleet modernisation alone could require $12-14 billion of funding over the next ten year,” CAPA says. http://www.thehindu.com/business/Industry/centre-may-have-to-open-a-cash-tap-to-keep-ai-running/article4419472.ece

To Avoid Delay, Airbus Drops Lithium-Ion Batteries

 Faced with the potential of a lengthy investigation into what caused batteries on two Boeing 787 jets to ignite or emit smoke last month, Airbus said Friday that it had dropped plans to use the technology on its forthcoming wide-body jet, the A350-XWB, to avoid possible delays in producing the planes. But Boeing, which has much more at stake, said later in the day that it would stick with the batteries, and the company is working with regulators to reduce risks even if the cause of the hazards is not clearly found.
All 50 of the 787s delivered so far were grounded in mid-January. And even though the problems have embarrassed Boeing and could cost it hundreds of millions of dollars, the company said Friday, “There’s nothing we’ve learned in the investigations that would lead us to a different decision regarding lithium-ion batteries.”
To some extent, Boeing’s bravado reflects a sense among battery experts that they have narrowed down the ways that the batteries, made by a Japanese company, GS Yuasa, could fail. That then increases the chances that a handful of changes may eventually provide enough assurance that the batteries would be safe to use.
Airbus was planning on a more limited use of the lithium-ion batteries than Boeing, and by switching to the more traditional nickel-cadmium batteries, the company can make the necessary changes as it is building the planes. Boeing, on the other hand, has a strong motivation to stick with the lithium-ion batteries in hopes that a solution will emerge.
Under flight safety regulations, industry and government officials said, Boeing might not have to go through as extensive — and time-consuming — an approval process if it redesigned the lithium-ion batteries as it would if it switched to the conventional batteries.
Even though the behavior of the more traditional batteries is better understood, they have not yet been certified for use in the 787s, and the batteries and related parts of the plane’s electrical system would have to be created and tested from scratch. Under the safety directive grounding the planes, Boeing might have a more straightforward path to get them flying again if it could persuade the Federal Aviation Administration that redesigning the lithium-ion batteries would work.
Federal and industry officials said Boeing would probably have to spread the eight cells in the batteries farther apart — or increase the insulation between them — to keep a failure in one cell from cascading to the others in the “thermal runaway” that led to the smoke and fire. Battery experts are also looking into whether vibrations in flight could have added to the risks of unwanted contact between the cells. And Boeing would undoubtedly have to wall off the battery within a sturdier metal container and make it easier to vent any hazardous materials outside the plane.
Aviation experts said the examination of such changes reflected what could end up being a difficult calculation for safety regulators: Will there be a way to ensure the safety of the batteries if they cannot tell for certain what set off the problems on the two planes?
Until now, most of the public statements by regulators have focused on the need to pin down the cause of the battery problems. But investigators, now weeks into their work, have been able to find only limited clues in the charred remains of the two batteries.
As a result, government and outside experts, working closely with Boeing engineers, have been studying the research on lithium-ion batteries carried out since Boeing won approval for its batteries in 2007 and, in essence, trying to come up with a safer design.
Government and industry officials said Friday that it was still too early to know if Boeing could devise enough changes to satisfy regulators and the flying public.
Airbus said it started informing airline customers on Thursday that it would not move ahead with an original plan to use the lithium-ion batteries on its A350s.
http://www.nytimes.com/2013/02/16/business/global/airbus-abandons-plan-to-use-controversial-batteries.html?_r=0

UB Group tries to pacify Kingfisher lenders

 In a bid to assuage the irate lenders of Kingfisher Airlines, parent company UB Group on Friday said it would find an early solution to the financial mess of the airline. It said it would use proceeds from the stake sale of a group company to Diageo.

UB Group’s latest move comes two days after Kingfisher Airlines’ lenders threatened to recall the Rs 7,500 crore loans given to Kingfisher Airlines by encashing the corporate and personal guarantees of UB Group and its chairman, Vijay Mallya.

“We have received no formal communication from the banks till date. We are in continuing discussions with them on ways to bring down their exposure, inter alia, from the proceeds of the Diageo transaction. The banks explicitly support the transaction with Diageo and would work with us in finding an orderly method of disposal of some of the pledged shares to Diageo if appropriate,” said UB group in a statement.

However, the group did not explain how the proceeds from the deal with Diageo would be channelled to Kingfisher Airlines’ lenders.

In early November 2012, Diageo, UB Holdings (UBHL) and United Spirits (USL) had announced a transaction worth Rs 11,100 crore, to give Diageo a controlling 53.4 per cent stake in USL. During that transaction, Diageo and UB Group had announced a 27.4 per cent stake would be acquired by Diageo from USL and UBHL and the remaining 26 per cent from the public shareholders of USL.

As part of the first step of acquiring the 27.4 per cent stake, Diageo is to pay Rs 5,600 crore to USL and UBHL. A sum of Rs 3,200 crore would go into USL, which will be used for its own debt reduction and operations. The rest, Rs 2,400 crore, will go to UBHL, to pay back its lenders and release the pledged shares so that these can be transferred to Diageo. After this transaction, UBHL will hold 13.4 per cent of the enlarged share capital, a majority of which has been pledged.

While announcing the deal with Diageo, Mallya had specifically added that UBHL would look into issues pertaining to Kingfisher Airlines and take appropriate steps. With UBHL’s debt at close to Rs 3,000 crore and a majority of the proceeds from Diageo to be used to reduce it, it would be difficult for UB Group to use the proceeds from the deal with Diageo to pare Kingfisher Airlines’ debt.

According to analysts tracking the company, with USL’s stock price shooting up around 70 per cent during the past six months — it currently trades in the Rs 1,800-Rs 1,900 levels — UBHL could look at offloading a part of its holdings and pay the proceeds to Kingfisher Airlines’ lenders. In addition, UB Holdings has real estate assets, which, when encashed, could fetch about Rs 650 crore. This can also be used to pay off part of Kingfisher Airlines’ debt.

The airline has been grounded for nearly six months and its licence suspended. In addition to the huge dues towards the consortium of banks, Kingfisher is also a defaulter to most of its stake holders such as airport operators, oil marketing companies, aircraft lessors and its 3,000-odd employees. Its accumulated losses stand at close to Rs 8,000 crore.
 http://www.business-standard.com/article/companies/ub-group-tries-to-pacify-kingfisher-lenders-113021500294_1.html

AI to fast track asset monetisation plan

Air India will fast track its Rs 5,000 crore asset monetisation plan in the wake of anticipated delay in equity infusion by government. On Thursday the airline board gave its nod to sale of land in Comibatore, Chennai and Kolkata and its properties in Hong Kong and Tokyo.
The sale of the land and foreign properties will be done by March 2014 and raise Rs 1,000 crore.
Air India plans to earn Rs 5,000 crore through sale and lease of real estate and land over a ten year period but now the company is aiming to achieve  the target in half the period. Air India's joint managing director Syed Nasir Ali is supervising the asset monetisation plan.
The delay in equity infusion and litigation over hiving off ground handling and engineering departments is reason the airline management giving a push to the asset monetisation. The funds raised through sale of assets will be used the airline's staggering Rs 42,000 crore debt.Under the turn around plan Air India is expected to receive Rs 30,000 crore in form equity and cash support from government till 2020-21 but now infusion may take place over a longer period. According to reports the airline was to receive Rs 8,500 crore in the current fiscal from government but received only half the amount. The balance will come next year.
In February the airline formally decided to hive off its engineering and ground handling departments. This move will reduce the airline Rs 3,000 crore annual wage bill but the move has been challenged by the engineering union through a writ petition in the Bombay High Court. A senior company executive however said the union was not against the hiving off of  engineering MRO per se and the objection was merely to transfer of employees.
"The entire asset monetisation programme will be conducted in a fair and transparent manner. We have constituted a three member committee comprising of retired Supreme Court judge, retired central vigilance commissioner  and retired Comptroller and Auditor General to oversee the process. We will have e-auction of
http://smartinvestor.business-standard.com/market/story-159728-storydet-AI_to_fast_track_asset_monetisation_plan.htm

Indigo, SpiceJet clear hurdle on aircraft import

New Delhi, Feb 15:   IndiGo and SpiceJet have cleared the first hurdle for importing more aircraft. Government sources told newspersons that the Aircraft Acquisition Committee of the Ministry of Civil Aviation had given the nod for IndiGo to import four Airbus A-320 aircraft, while SpiceJet had been allowed to import three Boeing 737 aircraft. The proposal will need to get the nod of the Civil Aviation Minister before the two airlines are allowed to import the aircraft. Government sources also indicated that IndiGo was also looking at importing smaller turbo-prop aircraft for enhancing connectivity to regional towns. The proposed induction will help IndiGo adhere to the new regional connectivity norms which are expected to be finalised soon. “The Government is to soon receive two reports on enhancing regional connectivity. These reports will be merged into one and the new norms will have to be approved by the Union Cabinet before being implemented,” a senior Government official said. – Our Bureau
http://www.thehindubusinessline.com/todays-paper/tp-economy/indigo-spicejet-clear-hurdle-on-aircraft-import/article4419858.ece

Kingfisher Airlines in cage: No cash, and now it has no jets to flyNEW

DELHI: Vijay Mallya-led Kingfisher Airlines' hopes to fly again seem to be steadily receding as the airline does not have any aircraft 'fit' to fly. On Monday, banks had withdrawn financial support to the airline by declaring their intention to recall loans. Since November 2011, the airline's fleet of 64 aircraft has come down to 38, none of which are airworthy.
According to sources at aviation regulator DGCA's office, 11 aircraft of the debt-laden airline were deregistered and taken back by lessors over 2012, with the last one deregistered on December 28, 2012.
DGCA sources say other aircraft lessors are desperate to reclaim their aircraft but cannot do so as the airline has cannibalised them, rendering them non-airworthy.
"Lessors are waiting for the remaining planes to get back into serviceable shape before taking them back. If they had the choice, they would have already done it," officials at the Directorate General of Civil Aviation told ET. KF Turbo Leasing, KF Aero and Plateau Aviation Ltd are the leasing companies that reclaimed aircraft last year. Meanwhile, the world's leading aircraft lessor International Lease Finance Corp (ILFC) has also applied for deregistering two of its planes. ILFC had leased four Airbus 320 and one Airbus 321 (total five) aircraft to Kingfisher
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/kingfisher-airlines-in-cage-no-cash-and-now-it-has-no-jets-to-fly/articleshow/18508561.cms
 

American Airlines and US Airways agree to merge,

create world's biggest airlineAmerican Airlines and US Airways say they have agreed to merge in an $11 billion deal to create the world's biggest airline.The combined carrier will be called American Airlines but run by US Airways CEO Doug Parker.
 The boards of the two airlines unanimously approved the deal late Wednesday, and the companies announced the agreement Thursday.
 The merger would reduce the number of major U.S. airlines to four: the new American, United, Delta and Southwest.
 The deal is a coup for smaller US Airways Group Inc., which pushed for a merger almost as soon as American parent AMR Corp. filed for bankruptcy protection in November 2011.
 While Parker runs the company, AMR CEO Tom Horton will serve as chairman until its first shareholder meeting, likely in mid-2014.
 AMR interests including creditors will own 72 percent of the new company and US Airways shareholders 28 percent.
 The companies said merging would create savings of more than $1 billion a year. The merger will be part of AMR's plan for exiting bankruptcy protection.
 The airlines said they expect $1 billion in combined savings.The companies had negotiated since August, when creditors pushed AMR to conduct merger talks so they could decide which earned them a better return: a merger or an independent American.
 The deal would need approval by AMR's bankruptcy judge and antitrust regulators, who have permitted three other big airline mergers to go ahead since 2008.
 The rapid consolidation has allowed the surviving airlines to offer bigger route networks that appeal to high-paying business travelers. And it has allowed them to limit the supply of seats, which helps prop up fares and airline profits.
 The new American would have more than 900 planes, 3,200 daily flights and about 95,000 employees, not counting regional affiliates. It will be slightly bigger than United Airlines by passenger traffic, not counting regional affiliate airlines. Read more: http://www.foxnews.com/us/2013/02/14/american-airlines-and-us-airways-reportedly-agree-to-merge-create-world-biggest/#ixzz2L20hrGoz

American Airlines, US Airways announce $11-billion mergerDallas (US), Feb 14:

American Airlines and US Airways say they’re merging in a deal they value at $11 billion, creating the world’s biggest airline.The combined carrier will be called American Airlines but run by US Airways CEO Doug Parker.
The airlines announced their deal today.It reduces the number of major US airlines to four.
http://www.thehindubusinessline.com/industry-and-economy/logistics/american-airlines-us-airways-announce-11billion-merger/article4415134

Air India may register operating profit in 2012-13New Delhi

Air India may report a small operating profit for the current financial year , but the net result will remain significantly in the red, the Centre for Asia Pacific Aviation (CAPA) said on Thursday. A new report titled ‘Decisive action on Air India’s future assumes urgency in light of foreign airline investment,’ adds that the airline reporting a small operating profit will depend on the impact of the Boeing 787 grounding and market conditions in the fourth quarter.
“Despite these improvements, deep structural issues remain. As a result, in the five years beginning 2007-08, Air India accumulated losses of close to $5.25 billion, a figure which it is estimated will increase by a further $950 million or more by the end of FY13 (2012-13),” the report said.
At present, Air India operates on 189 routes. Of these, according to the report, only 12 meet total costs. A further 82 cover their cash costs but not their total costs, and 95 routes, or just over half, do not even meet their cash costs. International routes are bleeding particularly badly and account for 80-90 per cent of losses.
 The Government has committed to fund the carrier’s turnaround plan. However, rather than infusing capital on a one-time basis, it is drip-fed in an uncertain schedule. When each small tranche is received, it is largely absorbed by overdue vendor and salary payments, rather than being utilised to implement turnaround initiatives. As a result, the re-capitalisation efforts are not providing the strategic stability required, the report said.Air India’s bank loans and aircraft-related debt total $9 billion, in addition to which there are vendor-related liabilities — to fuel suppliers and airport operators, in excess of $1 billion.
In fact, Air India’s debt is approximately twice that of all the other carriers combined. Air India’s fleet utilisation is very poor with only around 100 operational aircraft out of a total registered fleet of 127 aircraft (including Air India Express). The productivity of Air India’s bloated workforce continues to be a major challenge. The absence of a long-term fleet strategy, with nopending narrow body orders and no long-haul aircraft commitments beyond 2015, limits the future business case, the report concludes
http://www.thehindubusinessline.com/industry-and-economy/logistics/air-india-may-register-operating-profit-in-201213/article4415316.ece

Kingfisher lenders may sell shares of UB HoldingsMumbai, Feb. 14:

Lenders of beleaguered Kingfisher Airlines said that they will sell the shares of its holding company, United Breweries Holdings, to recover about Rs 500 crore.
Banks will go after the ‘low-hanging fruits’ (easily recoverable) first once the recovery proceedings are initiated. The sale could happen in the current quarter itself. They will alsinvoke corporate guarantee of the holding company (UB Holdings) and personal guarantee of Vijay Mallya, say bankers.
 “Of the Rs 1,700 crore, we have provided for 97 per cent of the total exposure and no further provisioning is expected,” said Diwakar Gupta, Managing Director and Chief Financial Officer, State Bank of India.
The total collateral, including personal guarantee, pledged with the consortium of lenders is Rs 6,500 crore.
Meanwhile, refuting bankers’ claims on collateral, United Breweries said that the brand ‘Kingfisher’ “has not been hypothecated or pledged” by the company to any lender to secure its loans.
In a filing to the Bombay Stock Exchange on Thursday, the company said that United Breweries Ltd is the owner of brand ‘Kingfisher’ registered under the respective Trademark classes pertaining to alcoholic beverages.
 The company further added that no shares of the company were pledged to the lenders of Kingfisher Airlines.
A consortium of 17 banks, including State Bank of India, IDBI Bank, Bank of India, Bank of Baroda and Punjab National Bank, have a loan exposure of about Rs 7,000 crore to the grounded Kingfisher Airline, which was once the second biggest airline of the country
http://www.thehindubusinessline.com/industry-and-economy/economy/kingfisher-lenders-may-sell-shares-of-ub-holdings/article4415561.ece

Kingfisher’ brand not pledged: UBUnited Breweries Ltd

UB), the beer maker, has clarified that the “Kingfisher” brand has not been pledged with banks towards collateral. Rather, the “Kingfisher Airlines” brand, valued at Rs.4,100 crore by Grant Thornton in April, 2010, was hypothecated with the banks, which claim that they could recover their money by liquidating the pledged assets, including the brand.Kingfisher Airlines was launched in May 2005.
“This has reference to the reports in a section of the newspaper/media relating to recall of loans by lenders by invoking securities, including the brand “Kingfisher”. We wish to bring to your attention that United Breweries Ltd. is the owner of brand “Kingfisher” registered under the respective trademark classes pertaining to alcoholic beverages. The brand “Kingfisher” has not been hypothecated / pledged by United Breweries to any lender to secure its loans,” UB said in a filing with the stock exchanges. “There has also been some speculation as to whether shares in United Breweries are pledged to the lenders of Kingfisher Airlines. We wish to clarify that no shares of the company are so pledged,” UB added. With these clarifications, analysts believe that banks would recover very little considering their exposure of over Rs.7,000 crore to Kingfisher.
 http://www.thehindu.com/todays-paper/tp-business/kingfisher-brand-not-pledged-ub/article4416766.ece

Walkout over airport projectThe Opposition Left Democratic Front (LDF)

on Thursday staged a walk out in the Assembly to protest against the government decision to go ahead with the Aranmula airport project disregarding the environmental consequences and violation of laws.
The government launched a scathing attack on the LDF, accusing it of playing a double game on the issue, approving the project while in power and opposing it while in the Opposition.
Seeking leave for an adjournment in the House, former Agriculture Minister Mullakkara Ratnakaran (CPI) said the government had not secured the mandatory clearance from the Ministry of Environment and Forests before deciding to pick up 10 per cent stakes in the airport project. He alleged that the government was playing second fiddle to the Chennai-based KGS Group, the project promoters.Chief Minister Oommen Chandy said the LDF government under V.S. Achuthanandan had cleared the grounds for the project in 2011. Defending the decision to pick up stakes in the project, he said the airport would earn revenue for the State.
Mr. Retnakaran responded that the previous government had sanctioned the project in principle on the condition that the promoters would abide by the laws. He added that the KGS Group had later violated at least nine laws relating to land reforms, land conservation, land use, irrigation, and SC/ ST Protection. “How can the government pick up stakes in a project that has breached so many laws? It is also an affront to this House that has approved a report by the committee on environment on the violation of rules by the promoters.”
Taking the Opposition by the horns, Revenue Minister Adoor Prakash produced official documents signed by the then Chief Minister V.S. Achuthanandan in 2011, directing the Pathanamthitta District Collector to make arrangements for transaction of the land in the name of the KGS Group. He said the directions were issued after the district authorities had pointed out the illegalities. “You were part of the Cabinet that had approved the project,” he told Mr. Retnakaran.
“It was the LDF government that decided to take a three per cent share in the project. We only enhanced the government stakes to 10 per cent.”
Adding to the discomfiture of the Opposition, Mr. Chandy said the LDF government had written to the Centre on February 26 that it was keen on promoting the Aranmula project in public interest. The then government, he said, had hurriedly notified the land needed for the project without examining the land records.
“The notification was done in haste to derive political mileage in the Assembly elections just around the corner,” Mr. Chandy said. The Government was in the process of de-notifying the land over and above the 500 acres needed for the project.
Highlighting the mounting protests by local people, Leader of the Opposition V.S. Achuthanandan urged the government to review the project. He said the LDF would do everything possible to stall the progress of the project.
Mr. Achuthanandan announced that the Opposition was staging a walk out against the government decision to go ahead with the construction of the airport.
http://www.thehindu.com/todays-paper/tp-national/tp-kerala/walkout-over-airport-project/article4417289.ece

Move to seal smuggling routesThe Customs and Central Excise

 Department will soon devise a set of procedures to prevent the illegal diversion of ketamine hydrochloride.
Highly placed officials told The Hindu that the department would prepare a list of manufacturers and distributors of the drug in the country and verify their stock and conduct periodic checks to prevent its illegal diversion.
Till 2011, there was rarely any restriction to possess, process or export ketamine hydrochloride or its more potent derivative, ketamine, under Indian law.In February that year, the Union Ministry of Finance listed ketamine and its various ‘salts and preparations’ as psychotropic substances under the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985.
The statutory order said the Central government had found ‘overwhelming evidence’ of the chemical compound smuggled out of India being abused as a ‘rave party’ drug by youth in South East Asia, Europe, and the US and this could ‘cause strain in international relationships between India and other sovereign States.’
Investigators said the inclusion of ketamine in the NDPS list of drugs caused its price to shoot up in international black market from Rs.7.5 lakh to Rs.10 lakh a kg.
South East Asian drug cartels ran a network of middlemen in India to procure the ‘injectable’ veterinary medicine and extract its ketamine component through a simple reverse chemical process (ketamine hydrochloride if heated, the hydrochloride part will evaporate) in backyard laboratories in South India. The powdered drug is then smuggled abroad, now even to Canada and Amsterdam, through various airports and seaports in the country.
http://www.thehindu.com/todays-paper/tp-national/tp-kerala/move-to-seal-smuggling-routes/article4417474.ece

Of cross-border ketamine ‘smuggling runs

’Had she followed television news or perused the day’s newspapers, Kannagi Vasu, 27, from Perambur in Chennai would not have perhaps been arrested at the international airport in Thiruvananthapuram on Thursday on the charge of attempting to smuggle ketamine to Malaysia, Customs and Central Excise Department investigators say. After Wednesday’s seizure of 5 kg of the drug from the check-in baggage of another air passenger bound to Malaysia via Colombo, the Air Intelligence Unit of the department had increased surveillance of ‘suspicious passengers’ in the sector.
In Kannagi’s case, investigators said they had prior information and detained her the moment she entered the airport.
They said Kannagi’s action seemed ‘naive’ because, ‘as a rule, experienced carriers rarely attempted a route where a smuggler had been arrested the previous day.’
She seemed entirely ‘oblivious of the drug seizure on Wednesday and her handlers had not warned her or she would have aborted the mission,’ he said.
Investigators said they found 7 kg of the drug concealed in her check-in baggage in ‘small polythene packets’ crammed inside 30 containers designed to hold ‘fancy bangles.’
Kannagi told them that the she was unaware of the contents of her baggage.
An acquaintance of hers in Paris Colony in Chennai had asked her to hand over the bag to a ‘contact’ who was scheduled to meet her at the Kuala Lumpur airport. Kannagi, a college dropout hailing from an economically backward family, had procured a passport in 2006. She travelled abroad for the first time, to Malaysia, in August 2012.
Till she got arrested on Thursday, she had visited Malaysia 14 times, which investigators described as ‘successful cross border ketamine smuggling runs.’
She travelled to Malaysia four times through Mumbai, five times through Chennai, three times through Kolkata, and two times through Thiruvananthapuram.
Each time, she had handed over the ‘bag given to her by her Paris Colony friend’ to ‘contacts’ in Kuala Lumpur.
Enforcers said Kannagi’s ‘handlers’ paid her not less than Rs.20,000 for each ‘successful run.’
They said Kannagi’s ‘thwarted mission’ on Valentine’s Day was supposed to be her last.
She was betrothed and due to get married in March. Additional Commissioner G. Raveendranath headed the ongoing anti-drug smuggling operation.
http://www.thehindu.com/news/cities/Thiruvananthapuram/of-crossborder-ketamine-smuggling-runs/article4417972.ece

American, US Airways seal $11bn merger

WASHINGTON: American Airlines and US Airways announced an $11-billion merger on Thursday to create the world's largest airline whose fleet will be close to 1,000 planes and carry some 166 million passengers annually. The new combine will fly to 336 destinations in 56 countries . Although American dropped its Chicago-New Delhi direct flight last year due to losses, and typically such mergers often cut capacity and eliminate routes, the union could result in revisiting the flight given the constant uptick in US-India traffic. The new entity will retain the name of American Airlines, which is the bigger of the merging partners, and it will be helmed by Douglas Parker, CEO of US Airways. Once the world's largest airline company before it was hurt by 9/11, the new American Airlines will again trump in size Delta Airlines which muscled up after a merger with Northwest, and United Airlines which also acquired heft after merging with Continental. Each claimed to be the world's biggest by some metric or the other at some point. Airline executives offered plenty of explanations about the rationale for the merger, but there were fears from other quarters about what such continuing consolidation and monopoly would do to the market. With the latest merger, the top four American fleets — American, United, Delta and Southwest — will control about 75% of the domestic market.
 http://timesofindia.indiatimes.com/business/international-business/American-US-Airways-seal-11bn-merger/articleshow/18509228.cms

7 kg of ketamine seized from woman passenger at airport

The Customs and Central Excise Department here on Thursday seized 7 kg of ketamine (a veterinary anaesthetic widely abused as a recreational drug in South East Asia) from Kannagi Vasu, 27, a Malaysia-bound air passenger hailing from Perumabur in Chennai.  Investigators told The Hindu on Thursday that they suspected that certain corrupt enforcers at the Kuala Lumpur airport perhaps profited from the smuggling of ketamine hydrochloride from various airports in India to Malaysia. In the past four months, the department and the Directorate of Revenue Intelligence (DRI) had seized the drug from at least 12 Kuala Lumpur-bound passengers from various airports in the country.
Curiously, most of the detained carriers choose the heavily policed Kuala Lumpur airport over other less-policed and remote ones in that country to ‘consign ketamine shipments from India.’
The smugglers, an international racket headed by Malaysian citizens of South Indian origin, would not land their ‘carriers’ in Kuala Lumpur airport ‘without some kind of official assurance,’ a top official told The Hindu. He said Malaysian authorities had recently arrested some of their own enforcers on the charge of abetting smuggling of ketamine from India. Drug smugglers faced death sentence in Malaysia and at least 30 Indians were facing trial in that country for ketamine smuggling. Hence, it was important that the racket be crushed to protect Indian citizens. He said the possibility of a ‘rare few’ Malaysian customs enforcers aiding Ketamine smugglers could not be ruled out. The Customs was due to take up the matter in writing with their counterparts in Malaysia. The Malaysia-centred ketamine cartels had a large network of middlemen in India. They procured the veterinary medicine from errant pharmaceutical companies and converted it into powder form in backyard laboratories and smuggled it to Malaysia to be peddled at high-end holiday destinations as a ‘recreational drug.’ Ketamine hauls, including the recent ones in Thiruvananthapuram, New Delhi, and Hyderabad, accounted for only a fraction of the actual amount of the drug smuggled out of the country. The smugglers increasingly used educated Indian women as carriers to pre-empt ‘intrusive’ checks at airports, officials said.
http://www.thehindu.com/news/cities/Thiruvananthapuram/7-kg-of-ketamine-seized-from-woman-passenger-at-airport/article4418001.ece

US Airways-American Airlines create world’s largest carrier in $11-bn deal

US Airways Group, spurned in three prior merger attempts, will combine with bankrupt AMR Corporation’s American Airlines in a $11-billion deal to create the world’s largest carrier.
 US Airways Chief Executive Officer Doug Parker will run the new airline, which will retain American’s name, as AMR CEO Tom Horton becomes chairman, the companies said today in a statement. AMR creditors will own 72 per cent of the stock, while 28 per cent will go to US Airways shareholders. The deal caps a wave of consolidation that swept up five of the 10 biggest US airlines since 2005. Along with United Continental Holdings and Delta Air Lines, Fort Worth, Texas-based American will be one of just three US full-service carriers with trans-oceanic routes.
“The combined airline will have the scale, breadth and capabilities to compete more effectively and profitably in the global marketplace,” Parker, 51, said in a statement. He began pursuing American shortly after it sought bankruptcy protection on November 29, 2011.
 For Parker, taking over at American completes an 11-year ascent to the top of the global industry. America West Holdings Corp. was the eighth-biggest US airline when he became CEO there in 2001, four years before he combined that carrier with US Airways. Bids to buy Delta and two efforts at a United Airlines merger all fell through in the past six years.
 The American deal also concludes a quest that Parker began shortly after AMR filed for Chapter 11 protection on November 29, 2011. He wooed AMR’s unsecured creditors committee, an ad hoc bondholder group and American’s unions as the airlines agreed in August to swap confidential data as a prelude to a tie-up.
 US Airways stockholders will receive one share of the new company for each share they hold.
 The board of the new company will have 12 members, with Horton and two others from American, four from US Airways and five appointed by AMR’s creditors.
“Until the transaction is completed, American Airlines and US Airways will remain separate companies and it will be business as usual for all of us,” Parker told US Airways employees in a message today.
Regulatory review
 The AMR-US Airways combination must be approved by the US Justice Department, which could order asset sales, if it finds the deal creates a monopoly in any area, and shareholders of Tempe, Arizona-based US Airways. It also must be endorsed by the court overseeing AMR’s bankruptcy. US Airways rose 0.6 per cent to $14.75 at 6:30 am in New York before regular trading. Investors already had been betting on a deal, almost doubling the price since January 25, 2012, when the company confirmed its interest in a merger, through yesterday.
The merger returns American to the top spot in global passenger traffic, a spot it secured with the 2001 purchase of Trans World Airlines Inc. It fell to No. 2 when Delta bought Northwest Airlines Corp. in 2008, then slid to third in 2010 when former United parent UAL merged with Continental Airlines. http://www.business-standard.com/article/international/us-airways-american-airlines-create-world%E2%80%99s-largest-carrier-in-11-bn-deal-113021400645_1.html

Civil aviation authority to replace DGCA

In a move to provide more functional and financial autonomy to the Directorate General of Civil Aviation (DGCA), it will be soon replaced by a Civil Aviation Authority (CAA).

From a note for the cabinet prepared by the civil aviation ministry, Arun Mishra, now the director-general of civil aviation, is to become chief executive officer (CEO) of the proposed CAA. There is provision for the strength to go up to 15 to 16, said a senior ministry official. The note is likely to be placed before the cabinet in April.
 The move is expected to give CAA more financial and functional autonomy. A senior ministry official told Business Standard, “Right now, whatever revenue DGCA generates from licences, etc, goes to the Consolidated Fund of India. DGCA’s own requirement has to be approved from the ministry. Now, CAA will collect the revenues, etc, and the additional money over and above its annual budget will go to Consolidated Fund.”
 Shortage of staff at DGCA has forced the regulator to outsource some of its work. DGCA has pilots on deputation from various airlines in its flight standards department, which is to check all pilots and safety operations at airlines. To avoid a conflict of interest, DGCA ensures these pilots do not make checks on their own airlines, said a ministry official. At present, it recruits through the Staff Selection Commission or the Union Public Service Commission. The salaries of technical staff will now be market-determined and for administrative staff, synchronous with the government level, said a senior ministry official.
 Low-cost airline policy for remote areas on anvil
 A policy to encourage low-cost regional air connectivity to remote places across the country is likely to be tabled before the Union Cabinet soon, official sources said on Thursday
http://www.business-standard.com/article/economy-policy/civil-aviation-authority-to-replace-dgca-113021500042_1.html

IndiGo banks on its success to start regional airlineIndiGo

, the market leader in domestic passengers, is planning a deeper plunge into regional operations by launching a separate subsidiary company.
 A senior civil aviation ministry official said Rahul Bhatia, managing director of IndiGo, had told the ministry the company planned to form a subsidiary for regional operations, with an initial fleet strength of 18-20 ATR turboprops. There was no timeframe for the commencement of the subsidiary’s operations, the official added.
 While an IndiGo spokesperson denied this, an SMS to Bhatia did not elicit any response.
 Currently, SpiceJet has the largest regional network---it also flies to Tier-III destinations with turboprop Q-400s. For the quarter ended December, SpiceJet recorded 82 per cent year-on-year growth in regional passengers and a profit of Rs 102 crore.
 An industry source said, “IndiGo is likely to order 50 ATR planes and the deal is expected to be announced at the Paris Air Show.”
 ATR did not comment on the IndiGo deal. David Vargas, the company’s media relations manager, told Business Standard, “ATR 72-500 is not sold anymore. In the 70-seat aircraft category, we only sell the advanced ATR 72-600. ATR 72 aircraft have been the most popular regional aircraft in India in recent years. We see strong potential for further development of regional networks across the country with these low-operating, cost- and fuel-efficient regional aircraft.”IndiGo operates 61 Airbus 320 aircraft in a single-class configuration. It primarily deploys these on metro routes, as low-cost carriers. The airline has also stuck to its low-frills identity---on-board meals and drinks are sold, not distributed free of charge.
 The government is coming up with a new policy for regional connectivity and routes to 80 towns would be shortlisted and auctioned to airlines. Initially, subsidy would be provided for this---the airline quoting the least requirement would be given charge of the route for two to three years, said a senior civil aviation ministry official.
 IndiGo has been embroiled in a tussle with the Ministry of Civil Aviation on the issue of securing 16 A 320 aircraft this year, part of an earlier plan to secure 100 aircraft. For this, the airline has already been given an in-principle approval.
 Civil Aviation Minister Ajit Singh has allowed the airline to bring only five of the 16 aircraft. At a meeting of the Aircraft Acquisition Committee this week, it had approved four additional aircraft. However, the minister is yet to approve this
. http://www.business-standard.com/article/companies/indigo-to-start-separate-subsidiary-company-for-regional-connectivity-113021400822_1.html