Budget time made it tough to approach Finance Ministry for Kingfisher: Mallya

NEW DELHI, MARCH 17: 

The presentation of the Union Budget and the completion of the Budget exercise could pave the way for Kingfisher Airlines to work towards getting back to full operations.

This is because the "lock down" in the Finance Ministry made it difficult for the airline Chairman and Member of Parliament, Mr Vijay Mallya, to meet with senior Finance Ministry officials and get his airline's financial troubles sorted out.

This was one of the messages that Mr Mallya gave his employees at a meeting here on Thursday evening.

FROZEN ACCOUNTS

The other clear message that Mr Mallya gave the employees was that their salaries will not be paid till the airline's accounts were unfrozen.

Holding the frozen accounts responsible for the state that the airline is in, a "humble" and "patient" Mr Mallya told his employees that the industry had great potential to do well. Reading from a voluminous document prepared by the Federation of Indian Chambers of Commerce and Industry, and another one from the International Air Transport Association, Mr Mallya told the 80-odd employees of Kingfisher Airlines that taxes were killing the sector.

The Chairman answered most of the questions raised during the close to three hour long interaction turning to the airline's Chief Executive Officer, Mr Sanjay Aggarwal, only once to check on when aircraft will be inducted in the fleet.

Taking partial blame for the current situation that the airline is in, Mr Mallya said that Kingfisher had proposed repaying dues to the authorities over 20 months rather than the 18 months sought by the authorities.

However, eventually, the authorities are believed to have told the airline that the dues had to be repaid in 12 months.

Inability to find a common ground had deteriorated the situation for the airline.

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CBEC threatens to drag Kingfisher Airlines to court

NEW DELHI, MARCH 17: 

The Central Board of Excise and Customs has threatened to take Kingfisher Airlines to court for evading service tax and not depositing the taxes collected from travellers.

"They (Kingfisher) have to face the court. Evasion has already taken place. They can even be jailed.

"There are two things - the dues have to be recovered and whatever punishment has to be given (by courts)," the Chairman, Central Board of Excise and Customs (CBEC), Mr S.K. Goel, said on Saturday.

The Department has already frozen several accounts of the airline for non-payment of dues which run to over Rs 75 crore.

Incidentally, the airline has informed the CBEC that it will pay the dues by March 31.

The Chairman added that Kingfisher had collected service tax at 10 per cent from its passengers, but did not pay this to the Government.

"So it is an evasion. For evasion there is a criminal liability under which courts are empowered to take action once it is proved that they have evaded tax. That action will be taken," he said.

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Emirates SkyCargo plans less-paper ops

BANGALORE, MARCH 17: 

Emirates SkyCargo plans to focus big on e-freight or paperless air waybills.

About 20 per cent of the cargo carrier's load moves as e-freight now, and "we want to make it 100 per cent by 2013-14," Mr Ravishankar Mirle, Regional Manager - Commercial Operations (Asia and Australasia regions), Emirates SkyCargo, told Business Line. Paper documents are making way for digitised ones, he said.

Removing paper documents means considerable savings per shipment, he said. "Being paperless also means less fuel, and we are saving $9 per shipment," he pointed out.

According to him, on an average the carrier carries 200 kg of paper (documents) per flight. While Dubai is already on 100 per cent e-freight, among Indian destinations, Bangalore also high e-freight penetration, he said.

For Emirates SkyCargo, India offers a capacity of about 13,000 tonnes a month, of which Bangalore accounts for 1,260 tonnes and was the fastest growing market. Emirates operates 21 weekly flights from Bangalore to Dubai, and offers over 300 tonnes of cargo capacity in the belly of these aircraft.

Fashion apparels contributed to 35 per cent of Bangalore's cargo, while pharmaceutical products, auto parts, hi-tech items and perishables also were important constituents, said Mr Mirle. According to him, a considerable part of cargo moving from Bangalore airport was from cities like Coimbatore, Tirupur and Sriperumbudur.

"We have enough capacity for the India market now to service demand, and are ready to deploy additional capacity if demand increases," said Mr Mirle. On the proposed hike in user development fees in some Indian airports, he said that escalation in a single year is detrimental to any airline.

"If the proposal goes through, it will increase our unit costs and make operations challenging," he said. But if the hike also brings with it considerable benefits to users, "then it becomes meaningful", added Mr Mirle.

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Etihad Airways to serve fresh, organic food on flights

Abu Dhabi - Etihad Airways, the flag carrier of the United Arab Emirates (UAE), will now supply fresh, organic food in its flights' first class.

 Etihad Airways has entered into a partnership with Abu Dhabi Organics Farms, the first internationally certified organic farming initiative in the UAE.

The airline will be sourcing fresh organic produce daily from the farm that would include fresh eggs, vegetables and honey.

Etihad will soon launch the farm-to-table concept across all cabin classes.

The Abu Dhabi Organics Farms was established in 1997 by Khalid Al Shamsi, a UAE national passionate about organic living.

Built on more than 55 hectares of land, the farm features greenhouses and fields and grows a wide range of vegetables and fruits from around the world. It also raises livestock such as camels, cows, chickens and goats.

The farm also offers daily field trips to educate children on the importance of natural organic food, sustainability and recycling. It helps children experience first-hand how a desert has been turned into fertile land.

The Abu Dhabi Organics Farms works with the Food and Agricultural Organization (FAO) of the UN.

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CBEC threatens to move court against Kingfisher

New Delhi: The revenue department has threatened to take Kingfisher Airlines to the court over alleged Service Tax evasion, saying the company has not deposited taxes it collected from travellers.

"They (Kingfisher) have to face the court... Evasion has already taken place... They can even be jailed," Central Board of Excise and Customs (CBEC) Chairman S K Goel told reporters in New Delhi.

He was replying to a question on whether Kingfisher has to face the court even if it deposits the tax dues.

The service tax department has already frozen as many as 40 bank accounts of the debt-ridden Kingfisher for non-payment of dues worth Rs 76 crore, which also include arrears and interest. Its IATA accounts too have been frozen.

"Now there are two things - We have to recover that (dues) and secondly whatever punishment has to be given (by court)," Goel added.

The airline had informed CBEC that it would pay the dues by March 31.

Goel said Kingfisher had collected the Service Tax at the rate of 10 per cent from its passengers, but did not pay to the government.

"So it is an evasion. For evasion there is a criminal liability under which courts are empowered to take action once it is proved that they have evaded tax. That action will be taken," he said.

The Service Tax department can take Kingfisher to court under Section 76 and 78 of the Finance Act. Under the provisions of the Act, the CBEC can charge up to 200 per cent of the tax evaded as penalty.

The income tax department too frozen the carrier's bank accounts for not depositing tax deducted at source.

The airline has a debt of Rs 7,057.08 crore. The financial crunch has hit its operations with dozens of flights being cancelled. Tax authorities have added to its woes by freezing its bank accounts for non-payment of dues.

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Budget 2012: Ailing Airlines like Jet Airways and Air India look to new ECB horizons

NEW DELHI: The big boys of the airline industry, both Jet Airways and Air India, may increase working capital loans on their balance sheets by 25% in the new fiscal year due to a difficult cost environment. They are also looking to cash in on the foreign borrowing tool announced in the Union Budget last week. 

Finance minister Pranab Mukherjee in his budget speech has proposed that airlines be allowed to raise working capital through external commercial borrowings (ECBs) with an annual cap of $1 billion.

"We would need up to 500 crore of working capital loan in 2012-13. If cash flow improves with better ticket pricing, the need for these loans could come down from that level. However, if fuel jumps, it could even increase that requirement," a senior official from Jet Airways told ET. Right now the Naresh Goyal-owned airline has 2,000 crore of working capital loans on its books.

 Similarly, cash-strapped Air India is also looking at the ECB route to raise nearly 5,000 crore as working capital debt in fiscal 2012-13. 

"We would like to avail of the maximum possible within the limit of $1 billion," a senior official from Air India told ET. The national carrier has a colossal 22,000 crore working capital debt already on its books. 

Working capital measures the amount of liquid assets a company has to build its business or to meet the costs of its day-to-day operations. For airlines, working capital is used for payments of fuel, airport and vendor charges and salary disbursements. 

The ECB sop will enable airlines to lower their interest cost on these much-needed funds and save 5-6% on cost of borrowing. 

"We think the ECB loans could help us substitute our rupee loans with dollar loans and bring about savings in However, others have also expressed concerns on how useful this tool would be in reality for airlines as their balance sheets are in a mess. "Requirement for working capital is increasing on a daily basis since the industry is not making cash. That is the need of today. 

But will airlines be able to avail it easily is a concern because of their deteriorating financial state. You can push Indian banks to lend to such companies with negative net worth, but not European," Deloitte Touche Tohmatsu senior director Vishwas Udgirkar said. 

Similarly, Dubey thinks that banks may be a bit wary of lending to airlines and may charge a premium, while airlines may also need to hedge on the currency risk. 

The Indian airline in

interest cost," the official from Jet Airways said. 

Sector analysts believe that external commercial borrowings are a much-needed lifeline for the airline industry, which was finding it exceedingly difficult to access credit due to continuous losses. 

ECB was not allowed for airlines earlier. For sectors like hotels, hospitals and software, where it was permitted, the limit was just $200 million. MoreoverECBs had to be a long-term loan with a maturity of five years for any amount above $20 million. 

"Our preliminary estimate is that airlines in India would save 150-300 basis points on their working capital interest through the ECB route," global consultancy firm KPMG director (aviation) Amber Dubey said. 

While rupee loans cost 13-14% in interest charges, foreign loans would cost 4-5%, and 3-4% hedging cost, would result in the net benefit of the loan being cheaper by about 4-5%. 

dustry has a total debt of up to 70,000 crore, while the industry is estimated to accumulate losses of 13,000 crore this year. 

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Small airlines to mushroom

Regional airlines are all set to drive the growth of the Indian civil aviation sector as large carriers struggle to sustain themselves. Several aircraft makers are vying to woo the new entrants to the commercial aviation.

"Most regional airlines were running short haul charter flights. However, with airports popping up in small cities, regional airlines are planning to foray into commercial aviation space," said Mr Saurabh Shah, the head of commercial operations for Bengaluru-based airport developer Regional Airport Holdings Intern-ational (RAHI) Ltd.

The companies, who are planning to launch commercial flights or quasi- commerical flights incl-ude Bengaluru-based Dec-can, New Delhi-based Religare Voyages and Hyderabad-based Turbo Aviation.
According to an official of Religare Voyages, the company has got permission to operate a regional commercial airline Mantra, which would initially operate in north India. The operational date of the airline is yet to be decided.

Speaking to this newspaper, an official of Deccan said that the company has long-term plans to start a commercial airline. But in the short term, they may run unscheduled flights to small towns.

The advent of small and short-haul aircraft, which can land on shorter runways, and the development of airports in smaller cities are expected to spur the development of regional aviation.

Under the 12th Five-Year Plan, the Airports Authority of India (AAI) plans to develop and operationalise the existing 25 small non-operations airports in the country.

Hyderabad-based regional airline Turbo, which bought a 19-seater aircraft from Czech Republic's LET Aircraft Industries, announced its plans to start its service to tier-2 cities in Andhra Pradesh. The service is expected to start in the next four months.

"Initially, the company would fly to Kadapa, Tirupati, Rajahmundry and Vijayawada from Hyderabad. It also plans Vijayawada-Vizag and Kadapa-Bengaluru routes. A ticket in the 19-seater aircraft to Tirupati could cost `2,000," said Mr V. Umesh, the managing director of Turbo Aviation.

Mr Miroslav Kozisek, commercial director of LET Aircraft Industries, says that their aircraft are made for the rugged Indian conditions. "These aircraft don't require an airstrip. They can land even on unpaved surfaces. The 19-seater commuter aircraft with the high wing design and and low maintenance is ideal for the Indian market."

Indian aircraft maker Mahindra Aerospace has entered into a deal to sell an unspecified number of eight-seater aircraft to a company, which plans to operate regional commerical operations.

Ventura Airconnect, a six-month-old company with focus on short-haul flights, operates 19 flights a day on its 19-seater Cessna B208s, with a hitherto unconnected Bhopal-Indore route. The fare starts from `1,500. The company expects to ferry 68,000 passengers and break even in a year.

"There is a tremendous growth potential in Madhya Pradesh, where road conditions are bad. We hope that the government create new airstrips and repair existing ones," Mr Arun Tiwari, head of sales and marketing, Ventura Airconnect.

It has recently expanded into Maharashtra and is currently in talks with the AP government.
"India remains an untapped market with a huge potential. There is scope for a pan-India presence" said Mr Nigel Har-wood of ESTD, which represents Czech airplane maker LET in India.

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AI offers variety of cuisines

Air India on Sunday said it would provide a wider variety in its in-flight cuisine on the metro sectors, including all types of Indian and continental cuisine in breakfast, lunch/dinner or high tea, on the domestic network, on flights of duration over 90 minutes from April 1.

In January, the airline had decided to offer only pre-packed snacks and not full meals as done earlier on all short-haul economy class flights.

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Kerala hosts 80% of Bahrain Air capacity in the country

Thiruvananthapuram, March 18:

Bahrain Air has announced four flights a week to Thiruvananthapuram with plans to increase it to seven by the summer.

Mr Richard Nuttall, Chief Executive Officer, Bahrain Air, made the announcement here on Friday.

Kerala will now constitute 80 per cent of Bahrain Air India's capacity, with 17 flights a week to Kochi, Kozhikode and Thiruvananthapuram.

Flights will depart from Bahrain at 9.25 p.m. and arrive at the Thiruvananthapuram International airport at 4.15 a.m.

The return flight will depart Thiruvananthapuram at 5.00 a.m. and arrive at the Bahrain International Airport at 7.30 a.m.

Flights have been scheduled for onward connection to other Gulf and Levant destinations, Mr Nuttall said.

Indian subcontinent remains a key focus area for Bahrain Air and Kerala continues to be a focal destination for the airline. At present there are about 3.5 lakh Keralite emigrants in Bahrain and another four lakh in the eastern province of Saudi Arabia.

"We are committed to develop Bahrain Air as a regional carrier within the Gulf Cooperation Council (GCC), Indian Subcontinent and Levant regions.

"We are positive towards the future and, traffic rights permitting, we will increase flights to India as we take more aircraft from next year," Mr Nuttall said.

Bahrain Air is a value for money regional carrier. It offers premium and economy class services on modern Airbus 319 and 320 aircraft.

It serves complimentary meals and passengers have standard baggage allowances of 20 kg for economy and 30 kg for premium.

The airline also offers extra baggage allowances at 15 Bahraini Dinar (Rs 2,000) for extra 10 kg, which is very popular with passengers returning from the GCC.

Bahrain Air also has a special section in its in-flight magazine in Malayalam to reflect the important of the region to Bahrain Air.

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