Tuesday, 1 May 2012

Air India flight makes emergency landing after bird hit


An Air India flight bound for Dubai had to make an emergency landing at Karipur airport near here on Monday after it was hit by a bird while taking off from there.
Airport officials said the flight, AI-937, was hit by a bird on its right engine while taking off from Karipur around 10 am. The engine on the right side was damaged and the flight had to be held in the sky for about 50 minutes to reduce its fuel.
An emergency alert was sounded at the airport as the flight came back for landing. Airline officials said all the 162 passengers on board were safe.
Air India engineers who examined the flight ruled that it required major repairs. A special flight has been arranged to carry the passengers to Dubai at 2 pm.
http://www.thehindu.com/news/states/kerala/article3370070.ece

Delta's refinery bid looks better on second glance


Delta Air Lines' (DAL.N) expected bid to buy a Pennsylvania oil refinery has had people in both industries joking that a company from the money-losing airline sector would be right at home in the money-losing world of East Coast refining.
But with the deal to buy ConocoPhillips' (COP.N) Trainer, Pennsylvania, refinery expected to be confirmed imminently, some say that Delta, the country's No. 2 carrier, could have the last laugh.
Airlines, after all, know a thing or two about managing high-risk, logistics-intensive industries through a slump. While Delta would be the first airline to buy into the sector, other end-users from Midwest farmers to steel companies have invested in the past; more recently, private equity firms have moved in.
Others say the deal is a defensive one, necessary to help prevent a run-up in fuel costs: the only other bidders for the plant wanted to shut it down and run it as a terminal, a move that could have reduced East Coast jet fuel supplies by more than a fifth and forced Delta to pay more for imports.
And while news of the bid surfaced only a month ago, it doesn't seem to be a hasty decision. Delta sent a team of experienced refinery specialists to examine the plant, which has refining capacity of 185,000 barrels a day, as early as last November, several sources familiar with the deal told Reuters. It established its bidding vehicle Monroe Energy LLC on December 13, 2011, according to Delaware records.
"It is an opportunity risk that Delta faces versus a negative risk exposure," says Geary Sikich, principal of Indiana-based Logical Management Systems, which specializes in assessing business risk and which has helped produce risk-modeling plans for major U.S. refiners.
JP Morgan's (JPM.N) involvement in the bid as financier and designated oil trader also raised some eyebrows, yet to many makes good sense. Not only has the bank become the biggest energy derivatives trader on Wall Street, but the refinery's proximity to New York Harbor - the pricing point for gasoline and heating oil futures - makes it especially enticing.
Several sources who have participated in the discussions expect the deal to be announced early next week, around the time of the May 1 spin-off of ConocoPhillips' refining arm into a separate company called Phillips 66.
Under the expected terms, Delta would purchase the refinery for around $150 million - about the cost of a new wide-body jet - and JP Morgan's commodities team would finance the refining process, including buying crude and selling fuel.
Both company have declined to comment on the discussions.
INDUSTRIES IN CRISIS
To be sure, it is a risky bet brought on by dueling crises in both industries.
Rising fuel prices pushed major U.S. airlines into the red for the first quarter of 2012 and could continue to put pressure on results during the peak travel season.
East Coast refining has also been pushed to the brink of insolvency, with a quarter of the region's initial 1.6 million barrels per day (bpd) of capacity already shut down, according to U.S. government data. Trainer, which has been idle since last year, is one of three refineries in the Philadelphia area that will be permanently shut if buyers aren't found.
Margins have been slammed by the converging pressures of high-cost imported crude oil feedstock, dwindling local fuel demand and heavy competition from new, modern plants in India, and Midwest rivals gorging on a surge in Canadian and North Dakota inland oil, trading at unprecedented discounts.
Simply owning a refinery would not protect Delta from rising crude oil prices. A penny saved buying at-cost jet fuel from the refinery would be one penny less Delta would earn at the plant, which would be paying market prices for its feedstock.
But there is a strategic dimension.
In 2010, more than 61,000 Delta flights departed from the three major New York-area airports, more than any carrier apart from Continental, according to government data. The hub accounts for 7 percent of Delta's U.S.-based flights. And Delta has just expanded service from LaGuardia and is spending $1.2 billion on a major overhaul of its facilities at JFK.
Shutting Trainer could jeopardize supply from a plant that is configured to produce about twice as much jet fuel as the average East Coast plant, according to U.S. Energy Information Administration data. It has the capacity to produce some 23,000 bpd of jet kerosene, more than 20 percent of the region's total.
Plus, keeping the plant running would give Delta more control over its own supply chain and, more importantly, could stave off the cost of importing fuel by tanker from Europe or the Gulf.
It now costs about 6 cents a gallon to ship clean fuel from Europe to Philadelphia. That could potentially add another 2 percent to Delta's fuel bill, which totaled more than $12 billion last year, when it consumed some 3.86 billion gallons or just over 250,000 barrels per day of jet fuel globally.
Last year, Delta paid an average of $3.06 a gallon, up nearly a third from 2010. For 2012, the U.S. Department of Energy forecasts the cost of jet fuel to average $3.35 a gallon.
Key to the venture's success would be tempering feedstock costs. In 2010, the last year in which Trainer was fully operating, it imported 175,000 barrels per day of crude, 75 percent of which was costly sweet crude from African producers including Nigeria, Angola and Algeria. Only 20 percent was relatively cheaper crude from Canada.
The new owners intend to change that by hauling some of the cut-price crude from North Dakota overland by train to Albany, New York, where it will be trucked or barged down to the Philadelphia region, according to sources involved in the talks. There are no pipelines to carry the crude directly.
"This will be a key part of the East Coast refining industry going forward. Finding a way to take the growing midcontinent crude and move it to the East Coast makes it a midstream solution," said one industry source with knowledge of the deal.
Light, sweet Bakken crude has recently has been trading at least a $20 discount to Brent crude, the benchmark for almost all oil produced in Europe and West Africa.
Apart from the obvious risks associated with operating a vast, volatile industrial facility, the danger now is that other East Coast plants may also be pulled back from the brink, plunging profit margins into the red.
"This is a jet gamble versus a gasoline gamble," said a source familiar with the deal.
STRANGE BEDFELLOWS
Delta would not be the first non-energy company to take fuel supplies into its own hands.
The Coffeyville Resources refinery in Kansas was built decades ago by a farmer group wanting to produce its own diesel, a mainstay fuel for planting and harvesting in the nation's breadbasket. CHS, now the nation's biggest farm collective, has owned refineries in Montana and Kansas since 1943.
Industrial firms also invested. Chemicals giant DuPont (DD.N) bought Conoco itself in early 1981 to provide a secure source of petroleum feedstocks. U.S. Steel bought refiner Marathon the following year, angling both to diversify its business and get a better grip on energy costs. Both companies split out their energy divisions two decades later.
The mechanics of refining would be foreign to a consumer-oriented corporation like Delta, but elements of the industry may be familiar, says Robert Mann, an airline consultant in Port Washington, New York.
"It's an environmental nightmare, potentially. It's a capital intensive business. It's a market-based business with high volatility, it's a heavily regulated business," he said.
The more recent trend has been toward private equity deals or niche start-ups run by experienced management firms. The Carlyle Group is now in exclusive negotiations to buy a majority stake in Sunoco's (SUN.N) Philadelphia plant, the largest on the East Coast and also at risk of closure.
Often in concert with financial investors, big banks have looked to strengthen their trading and risk-management operations with so-called "supply and offtake" deals in which they will contract to supply a refinery with its crude, or sell surplus refined fuels in the open market.
"There are a lot of cash-strapped refineries who need access to cheap capital," said Mark Routt, senior staff consultant with KBC Advanced Technologies in Houston, explaining the trend toward out-sourcing trading operations to a bank.
"The refiner gets a small return and a positive cash flow, while the off-taker has low-risk access to both crude and product markets with no long-term commitment."
JP Morgan, Goldman Sachs (GS.N) and Morgan Stanley (MS.N) have tied into deals with smaller refiners in the United States, including Alon (ALJ.N), Northern Tier and PBF Energy, firms that would otherwise lack the scale to trade efficiently.
The Trainer arrangement has a special allure thanks to its proximity to New York Harbor, offering JP Morgan's oil traders the ability to more closely manage the jet fuel, diesel and gasoline hedges based on the U.S. RBOB gasoline and heating oil futures, which are settled with barrels delivered to the storage tanks in the harbor.
Such supply-and-offtake deals among independent refiners have allowed many such plants to stay open after integrated oil companies started to exit refining, according to an IHS CERA report in February that was commissioned by Morgan Stanley.
Whatever comes, one thing is assured: scrutiny.
"If it doesn't go well, it will get so much more attention than it probably deserves," says Raymond James airlines analyst Savanthi Syth. "But if it goes well, they'll be heroes."

First Dreamliner to fly to India today, courtesy JAL


Japan Airlines (JAL) will become the first carrier to bring a Boeing 787 Dreamliner to India when it lands the aircraft in New Delhi from Tokyo tomorrow.
“With the launch of the Dreamliner, India will become the second country in JAL’s operations to get this special high-end aircraft. This reiterates our commitment to the Indian market. The first Dreamliner service will be launched in India from tomorrow,” said country manager Yasushi Isomura.
Japan Airlines runs Boeing 777 service five days a week, on Tuesday, Wednesday, Thursday, Friday and Sunday. The Dreamliners will operate for four days, excluding Thursday, when the airline will operate Boeing 777.
With the operations of the Dreamliners, the airline will bring down its capacity on offer by 25 per cent. A Dreamliner has 186 seats compared to 215 in a Boeing 777. Delhi is the second international destination for JAL where it has launched a Boeing 787. Earlier this month, it launched its first Dreamliner service to Boston in the US. Isomura said India was one of the most profitable routes for JAL and the company would be able to cater to the demand.
Meanwhile, the airlines also said it plans to list on the Tokyo Stock Exchange by next March.
“We came out of government control last year. We are trying our best to relist within this fiscal year, that is by March next year,” Yasushi Isomura said, without giving any other details.

Air India's last chance for a take-off Big question: Will the cash cash-strapped airline take this lifeline seriously?


Air India has long been synonymous with waste, inefficiency and a metaphor for all that is wrong with government enterprise. It has piled on loss after loss, amounting to Rs 20,000 crore, and has also managed to rack up a mammoth Rs 43,000 crore in debt—both of which would probably get the board of directors in any other company in India or worldwide fired. Yet, the airline has managed to keep aloft, thanks to the munificence of the state and has recently got another infusion, this time of Rs 30,231 crore.
Now, the government has come up with yet another plan to not just keep its planes in the sky, but to finally turnaround the airline. “Reviving Air India would not be an easy task but is not impossible and that is why the government has offered all support,” said Amrit Pandurangi, Senior Director at Deloitte Touche Tohmatsu.
Promises of a turnaround have been made before to little effect, so it’s natural to feel a flood of scepticism at such proclamations. Yet, judging by the series of initiatives, the traction achieved on some of these, as well as the positive results the airline has managed to eke out in a relatively short space of time, industry observers are saying that perhaps this one time it may just manage to pull it off.
Getting leaner
The first prong in Air India’s three-pronged thrust towards operational stability is the way in which it has restructured itself—by forming two separate subsidiaries, one for ground-handling and the other for engineering. “Unlike us, airlines globally have separate companies to do ground handling and major service and repair of the aircraft. First on our agenda is the creation of subsidiaries and the trimming of our workforce to service the airline needs,” said a senior Air India official, who did not want to be identified.
This involves shifting 15,000 employees from the main airline to the subsidiaries, which will bring down the employee per aircraft ratio from 285 employees today to a globally acceptable level of 172. Air India has 28,000 permanent and 10,000 contract employees to service a fleet of 133 aircraft. “The employees will have no reason to complain because they are shifted on the same terms and conditions,” the official said.
The official further said the engineering subsidiary is projected to make nominal losses in the first two years but should start making profit from the third year. The ground handling subsidiary is projected to start making a profit from day one.
Enter Dreamliners
The second prong of Air India’s turnaround lies with an aircraft that is going to become the lynchpin for Air India’s future success, the Boeing 787 Dreamliner, the deliveries of which have been delayed by over three years. The airline will get seven of them by January 2013 and three more will come in 2013-14. “The operational cost of the aircraft is 20 per cent less than any aircraft type, which helps in making a sector cash-profitable in as early as 90 days,” said the official.
With its Dreamliners, Air India plans to start flights to Sydney and Melbourne from Delhi and also replace the aircraft in service on the Frankfurt, Paris and London routes. The airline will also start new flights to Moscow, Rome and Paris in the next financial year. Apart from these routes, the airline plans to increase the utilisation of Delhi as its hub, by launching more flights to Dhaka, Kuala Lumpur and Colombo, amongst other destinations.
Managing debt
Finally, the biggest relief the airline will arguably receive is from the restructuring of debt. Banks are restructuring the airline’s loans of Rs 18,000 crore. Of that, Rs 10,500 crore will be converted into long-term loans, with a repayment period of 15 years, and the rest—Rs 7,400 crore (approximately)—will be repaid to banks through a government-guaranteed bond issue.
This restructuring will give it much needed breathing room. It comes with a moratorium of up to a year that is estimated to bring down the interest payment outlay by Rs 1,000 crore in the first year from the current Rs 1,700 crore.
The airline also plans to take the benefit of converting up to Rs 1,400 crore of its working capital loans through dollar loans. The government, in the Budget, has allowed airlines to raise $1 billion of loans for working capital needs through external commercial borrowings. “The implementation of debt restructuring gives us money in hand to repay our vendors and also bring back four of our narrow-body aircraft back in line that are grounded because of the cash crunch,” said the official.
The debt restructuring and cash infusion is a huge weight lifted off the wings of the airline, which has yet to pay over Rs 4,500 crore to different vendors, including Rs 2,800 crore to oil companies and around Rs 700 crore to airport operators.
Many may say that bailing out Air India is a waste of public money and talk of the airline turning itself around is an old tune that has run its course. Still, the figures for the first three months and 20 days (January to April) of this year tell a different story. “Our revenue in the period starting January till the first 20 days of April have increased by 35 per cent and this will increase further, as we get the delivery of aircraft and normalise operations,” said the official. A growth of 35 per cent in revenues is no mean achievement when the fares during the same period have increased by 20 per cent.
The path ahead
It’s important to remember though, that the airline has a long way to go before it can break out the bubbly. First off, the infusion in Air India is conditional and the airline has to earn it. It has to improve its on-time performance to 90 per cent in two years from 71 per cent now. It also has to improve its passenger load factor to 73 per cent by 2015, and to further increase it to 75 per cent beyond 2015, from 69 per cent currently. Based on the plan, the airline would get an operational profit by 2018.
It is more confident now than ever of flying itself out of trouble. “We made huge losses primarily because of two things — huge burden of working capital loans and high fuel prices. Debt restructuring will take care of the working capital loan burden and increase in revenues will help us offset high fuel costs,” the official added.
Still, there are do’s and don’ts to watch out for. “The government should not interfere in the day to day functioning of the airline. The key to revival lies in the strict implementation of the plan,” said Pandurangi of Deloitte Touche Tohmatsu.
It’s still a long way to go before any kind of verdict can be issued about the odds of Air India pulling off a comeback. But one thing seems certain. Air India will probably not get a chance like this again.

New terminal in Kolkata airport will be commissioned soon: Ajit Singh


Kolkata, April 30:
The new terminal of the Kolkata airport is likely to be commissioned soon, Mr Ajit Singh, Union Civil Aviation Minister said here on Monday.
According to the Minister, the new terminal will have a capacity of four million (40 lakhs) passengers along with helipads and renovated air-strips.
“The ongoing modernisation work is nearing completion and the terminal building with an increased capacity of 4 million passengers will be commissioned well within another two to four months,” he said following a meeting with the West Bengal Chief Minister, Ms Mamata Banerjee, at Writers' Buildings.
He added that developed air connectivity will help promote tourism in the region. “Kolkata airport is not only the gateway of eastern and north-eastern India, but also the entire South East Asia,” he said.
Ms Mamata Banerjee, meanwhile, added that she has already urged the Minister for the new terminal to be operational by October (before the Pujas).
She further added that requests have been made to the Planning Commission to provide financial assistance for required renovation and additional renovation work at the Cooch Behar airport. Additional land required for the airport project will be provided. A request to increase flight frequencies to Bagdogra airport and setting up of new airport in Malda have been the other talk points of the discussion, the chief minister said.
According to Ms Banerjee, suggestions to set up heli-ports at Balurghat, Sundarbans, Digha and Haldia and introducing air connectivity (through helicopters) in these areas have also been made. Talks were also on to have similar helicopter services between Asansol and Durgapur
http://www.thehindubusinessline.com/todays-paper/tp-others/tp-international/article3371757.ece

Pay more to fly out of Mumbai from today


New Delhi, April 30:
Flying out of Mumbai will become more expensive from Tuesday.
The Directorate General of Civil Aviation has allowed Mumbai airport to levy a development fee of Rs 100 on every departing domestic passenger and Rs 600 on every passenger flying abroad from May 1. The DGCA has allowed Mumbai International Airport Ltd to levy the development fee for 23 months up to March 2014.
MIAL may exempt some passengers from the levy of the development fee including children below the age of two, holders of diplomatic passports, airline crew on duty including sky marshals and persons travelling on official duty from the Indian armed forces.
The Central Government had approved the levy of a development fee of Rs 100 from every passenger departing on a domestic flight and Rs 600 on a passenger taking an international flight for 48 months from April 2009.
The fee was approved on an ad-hoc basis to bridge a funding gap of Rs 1,543 crore in the project.


Flying from Chennai, Kolkata set to get costlier


AAI also plans to levy user development fee at 10 other airports
New Delhi, April 30:
After Delhi and Mumbai, now flying from Chennai, Kolkata and 10 other airports is set to become costlier.
The Airports Authority of India (AAI) has sought an increase in airport charges (which includes user development fee) for the two metro airports, while it plans to levy a user development fee for 10 other airports.
A person familiar with the development told Business Line, “The Authority is seeking a 50 per cent hike in airport charges for Chennai while for Kolkata the quantum is 160 per cent. A formal proposal is being sent to airport regulator Airports Economic Regulatory Authority (AERA).”
Increase in airport charges for Chennai and Kolkata will also mean increase in user development fee. Since passenger capacity is less in Kolkata while investment is high, an increase is being sought for Kolkata, the person added. Airport charges include landing, parking, housing and user development fee (UDF).
Charges such as landing, parking and housing are paid by Airlines. These charges reflect in their operating costs and airlines collect them from passenger as a part of basic fare. UDF is levied above the basic fare. It is paid directly by the passenger and collected by the airlines.
While increase in other charges are permanent, UDF is charged for a specific period.
Interestingly, when AAI earlier approached the regulator for approval of a development fee of Rs 150 per passenger, the regulator had indicated that it might not accept the proposal. The State-owned airport operator had approached the regulator seeking levy of the fee to partially offset the expenditure incurred in modernising the two metro airports.
The development fee is a pre-financing levy. Sources indicated that the regulator feels the fee should be levied only as a “last resort” and when there is no other option left to bridge the gap in the funding of the project.
In this context, there are sections in the AERA which feel that it makes little sense to allow the AAI to raise about Rs 150 crore through imposition of development fee when the entire cost of Rs 2,500-3,000 crore is being raised by the airport operator.
Though the regulator has said, on record, that the proposal is still under consideration and no final decision has been taken.

Air India, Asiana Airways enter into code-share agreement


In a bid to provide direct connectivity with Seoul, Air India has signed a code-share agreement with South Korea's Asiana Airways, which is expected to be implemented soon.

"As per the agreement, which would be finalized for implementation at the earliest, both Air India and Asiana Airways would share code on the flights operated by each other on the India-South Korea (Seoul) and vice-versa sectors, on a free flow basis," an Air India official said.

The required testing system for such code-share cooperation would begin at an early date, he said.

Code-share is a business arrangement where two or more airlines share the same flight. A seat can be purchased on one airline but the flight is actually operated by a cooperating airline under a different flight number or code.

Air India is also in the process of entering into similar code-share arrangements with Air China and Egypt Air in the near future, the official said.

Air India presently has code-shares with 12 international airlines. They are Lufthansa, Singapore Airlines, Kuwait Airways, Air Mauritius, Austrian Airlines, South African Airways, Aeroflot, Sri Lankan Airlines, Swiss Airlines, Ethiopian Airlines, British Midland and Turkish Airlines.

With Asiana, Air India proposes to expand the code-share agreement to freely include additional sectors on each other's network, based on connectivity needs and approvals from the regulatory authorities.

Asiana Airways would also explore opportunities to fly to more destinations in India, subject to regulatory approvals. Both carriers are also preparing to integrate their Frequent Flyer Programmes (FFP) for the mutual benefit to allow a passenger flying Asiana to earn points on his or her Air India FFP and vice-versa. Asiana flights would also operate under an Air India code and vice-versa.

JAL to fly Dreamliner to India from tomorrow


New Delhi, April 30:
Japan Airlines is to operate the Boeing 787 aircraft, more popularly known as Dreamliner, to Delhi from May 1.
JAL will be the first commercial airline to operate the newly introduced aircraft on regular flights to India.
Addressing a press conference, a senior airline official said the Boeing 787 aircraft will be used to operate four of the five weekly non-stop flights between Delhi and Tokyo Narita.
The decision to operate the Boeing 787 will see an almost 25 per cent reduction in seats being offered on the sector. The airline currently uses a Boeing 777 aircraft to operate the five weekly flights.
Seating capacity
While the Boeing 777 can sit 247 passengers, the Boeing 787 sits 186 passengers. The airline's Country Manager, Mr Yasushu Isomura, said that India will be the second country in JAL's global operation to which the Boeing 787 will operate. The airline hopes to operate a daily flight to Delhi with B787 from winter this year.