Govt to fast-track proposal for FDI in domestic airlines

Security concerns to be addressed by strict screenin

New Delhi, May 20:

The Government plans to fast-track the proposal to allow foreign airlines to invest in domestic airlines once the ongoing Parliament session ends on May 22.

It was in January this year that the Civil Aviation Ministry had announced a “broad consensus” in the Government on allowing foreign airlines to acquire an up to 49 per cent stake in domestic airlines. But the proposal is yet to be approved by the Government.

At the moment, the proposal is undergoing inter-Ministerial consultations before it is brought to the Union Cabinet for final approval. Official sources confirmed to Business Line that the proposal will be accelerated soon after the Parliament session is over.

The Indian Government used to allow foreign airlines to invest in domestic airlines when the sector was first opened in the early 1990s. At least three West Asian carriers, including Kuwait Airways and Gulf Air had invested in Jet Airways. However, when the policy was changed and foreign airlines were banned from having a direct or indirect stake in domestic airlines, the foreign airlines' stake was bought by Jet Airways.

Growing interest

Officials claimed that, contrary to the public posturing, a number of domestic airlines have informally approached the Ministry of Civil Aviation, seeking that the proposal be pushed through at the earliest. Besides, a number of global private equity funds that traditionally have a stake in several leading international airlines have also been making discreet inquiries from the Ministry on the issue.

Official sources said that foreign investment in Indian carriers is being given a thrust right now because most domestic airlines are bleeding and banks in India are reluctant to fund most of them.

So, there are only a few options left to keep them afloat.

Even as the Government starts the process of implementing a change in policy, there has been a steady stream of chief executive officers and owners of global airlines visiting the Ministry of Civil Aviation.

In March this year, the Chairman and Chief Executive, Emirates Airlines and Group, Sheikh Ahmed bin Saeed Al-Maktoum, visited the Ministry of Civil Aviation. Emirates is one of the most profitable airlines in the world.

Earlier this month, it announced the 24th consecutive year of profit-making, posting a profit of $629 million.

The CEO of a European airline, along with the promoter of a private airline in India, also called on Civil Aviation Ministry mandarins earlier this month.

Officials pointed out that, as and when the change in policy is brought about, there will be adequate checks and balances to ensure that investments from countries or sources that are detrimental to India's security are blocked.

Strict screening

Each proposal by a foreign airline will have to be cleared by the inter-Ministerial Foreign Investment 

Promotion Board (FIPB). With the Home Ministry being a part of FIPB, any proposal considered against

 India's security interests will be blocked, officials said.

http://www.thehindubusinessline.com/todays-paper/tp-corporate/article3440089.ece

Not waiting for striking pilots to return: Ajit Singh

Hyderabad: Virtually sounding a warning to the striking Air India pilots, Civil Aviation Minister Ajit Singh on Sunday said the government is not waiting for the pilots to return to work but making plans to move ahead.

Reminding the pilots and other employees that their survival was linked to Air India, he said that nobody is going to give anymore public money to the airline and "they will not survive for too long" if the company does not become competitive.

"We are not waiting. We are making plans. If you take the pilots trained in V-737 or Airbus 320, (in) three to six months they can be trained to fly these planes. "So, in our plan for revival, when we implement Dharmadhikari report, we have to be very patient and firm at the same time.

"There will be many such hiccups on the way," he told reporters on the sidelines of a book release function.

Contending that there are "no issues" to go on strike and the pilots were "ill", he said plans were afoot to induct and train more pilots.

He, however, said the government is ready to listen to the concerns of pilots once they return to work and address them seriously without being vindictive in any way.

"I don't understand why they are on strike to begin with. There are no issues. Whatever few issues they had, that s what exactly Dharmadhikari report was meant to address. "We have already started discussions. Secondly, they did not even give any notice. So, it is not strike.

"They are just not well. They are ill. So, they are basically keeping away from work," he said.

The minister said the High Court had directed the pilots to go back to firm. "It is illegal strike. I said even in Parliament that let them come back to work, we will listen to all their problems. Government will not be vindictive in any way. So, it seems to me that they do not want to come back to work," he said.

Around 400 Air India pilots owing allegiance to Indian Pilots Guild(IPG) are on strike since May 7 and the services of 101 pilots have already been terminated.

Singh said the pilots and other employees need to understand that their survival depends on Air India's survival and pointed to demands that the airline should be shut down.

"We are already flying about 38 of the 45 destinations that we were flying earlier. Of course, they are making a business plan to induct more pilots or train more pilots," he said.

The minister said while Rs 30,000 crore have been allocated to make Air India viable, "it is not at one time. It is based on attaining certain performance standards. There are many milestones on the way. Government or anybody, nobody is going to give anymore public money to Air India."

"They have to become competitive with the rest of the industry. Otherwise, they will not survive for too long," he said.

"Their survival depends on Air India's survival. They have no money to pay the wages. They have not paid the airport authorities. They don t pay the oil companies. As I said, many people in the government, more civil aviation experts and many people in the media want Air India to be sold off or shut down.

"Pilots or employees have to understand that. It is in their interest to revive Air India. That should be their first loyalty," he said.

http://ibnlive.in.com/news/not-waiting-for-striking-pilots-to-return-ajit-singh/266511-3.html

Jet soars in cloudy sky

Aircraft reconfiguration and Kingfisher?s slide help the airline consolidate its top spot, but widening losses and IndiGo?s rapid rise are big concerns

In the aviation sector, FY 2012 will be remembered for record losses, downsizing of Kingfisher, Air India’s constant labour crisis, IndiGo’s rapid rise — and Jet Airways’ continued dominance of Indian skies. No wonder, the stock market just loves India’s largest airline by market share. Shares of Jet have jumped almost 30 per cent in a month, outperforming other airlines.
Despite a tough operating environment and 42 per cent spike in fuel costs, Jet has managed to stay ahead of the curve adding capacity and seizing advantage of Kingfisher’s downslide. Data show that in the fourth quarter of 2012, Jet grew faster than domestic competition in both capacity as well as number of passengers. While industry capacity grew 12 per cent, Jet plus Jetlite (rebranded as Jet Konnect in March) grew 22 per cent. In terms of passenger flown, Jet grew 23 per cent against the total industry passenger growth of 7 per cent. This was the second successive quarter of growth for Jet, after its growth was slower than the industry average in the first and second quarters.

What exactly did Jet do to achieve this? The airline added capacity both by adding new flights and reconfiguring its Boeing 737 planes, which are flown on the domestic and short-haul international routes. Jet along with Jet Konnect has a market share of 28.2 per cent.

In the third quarter, Jet added 30 daily flights in its winter schedule connecting Madurai, Bangalore, Chennai, Kolkata, Ahmedabad and other cities, and in the fourth quarter, it added eight daily flights in JetLite. However, the main increase in capacity came through aircraft reconfiguration. While Air India is planning to reconfigure planes to reduce business class seats and Kingfisher too has carried out the same on its airbus fleet, Jet reconfigured 19 Boeing 737 planes during the last six months.

With this, Jet halved the business class seats in these planes to eight but increased the overall capacity by 16 seats per flight. Instead of 16 + 138 and 16 + 102 configuration, the airline flies 8+162 and 8+126 configuration.

“We decided on the strategy early last year before Kingfisher Airlines reduced its frequencies. There wasn’t such a great demand for Premiere (business class) outside the metros. We also wanted to increase revenue per flight and make our assets more productive. The strategy is paying off. We increased the market share and revenues with the same number of planes,” says Jet’s Chief Executive Officer Nikos Kardassis. Reconfiguration has resulted in higher revenue per flight and lower cost per seat, he adds.

On a consolidated basis, revenue grew 24 per cent to Rs 4,638 crore in Q4, 2012 and passenger carried increased 23 per cent. On a standalone basis, yields increased 9.6 per cent on a Y-o-Y basis.

Also, Jet has posted an operating profit compared with an operating loss in the December quarter. The company attributes the better operating performance to “increase in fares and strict cost control measures”.

Another fallout of Kingfisher’s reduced operations and flight disruptions in the earlier part of the year was transfer of business class passenger traffic to Jet Airways. Travel agencies too stopped booking on Kingfisher as the airline faced cash crunch and was suspended from the International Air Transport Association’s billing settlement plan. As corporate clients moved away from Kingfisher, Jet saw 14 per cent growth in domestic business class passenger numbers in Q4 2012 on a Y-o—Y basis.

Centre for Asia Pacific Aviation’s Kapil Kaul says Jet Airways has been and will continue to be the largest beneficiary of Kinghfisher’s contraction from 66 to 16 operational aircraft. Half of these regional ATR aircraft and has left the domestic business market open for Jet. CAPA expects Jet to place an order for 100 narrow body planes in FY 2013 and is evaluating Airbus A320neo.

But it’s not roses all the way. The improvements in its numbers can’t hide the fact that Jet’s net profitability hasn’t improved. The company’s March quarter loss at Rs 298 crore has widened by a huge margin year-on-year as well as sequentially because of higher interest and depreciation cost that have been eating into its earnings before interest, tax, depreciation and amortisation operating margin has also declined from 11.6 per cent to 9.2 per cent.

Also, according to travel industry sources, though Jet gained in the premium traffic and on metro routes, IndiGo grabbed a larger pie of passengers in Q4. “Jet went in for revenue growth and IndiGo got the market share,” an aviation industry source says, pointing out that because of lower fares, IndiGo increased its market share.

The Directorate General of Civil Aviation data show though Jet plus Jet Konnect have a higher market share and led the pack in May, IndiGo has 24.9 per cent market share which is higher than Jet (standalone) share at 21.4 per cent. Till about six months back, IndiGo’s market share was around 19-20 per cent. That’s some food for thought for Jet Airways.

http://www.business-standard.com/india/news/jet-soars-in-cloudy-sky/477633/

Jet Airways in talks with Star Alliance, SkyTeam

Jet Airways, which has been in advanced talks to join the global airlines' grouping Star Alliance, is also holding discussions with the competing alliance SkyTeam.
"We are in talks both with Star Alliance and Sky Team. Let us see what materialises. That is all I can tell you at this point of time," Jet Airways Chairman Naresh Goyal told PTI.
Jet Airways was earlier in an advanced stage of joining Star Alliance along with Air India, whose induction into the airlines' grouping was put off primarily due to its precarious financial health.

While Star Alliance includes Air Canada, Air China, ANA, Lufthansa and Singapore Airlines and operates 20,500 daily flights to 1,200 airports, SkyTeam has Aeroflot, Air France, China Eastern, Delta Airlines and KLM among others, and operates 14,700 daily flights to 958 destinations.

In an interaction on the sidelines of the 68th Annual General Meeting of the International Air Transport Association in Beijing, Goyal said Jet was also considering expanding its international operations to destinations that were "economically viable".

"We want to go to a few places in Europe and we are looking at those destinations which will make money, like Paris, Munich and Frankfurt to name a few," he said.

Currently, the airline operates flights to Brussels, Milan and London in Europe. It has, however, decided to stop its flights to New York (JFK) from September 10, though it would continue operations to Newark.

Goyal also said the tax rates in India were between 200- 300 per cent higher than those in China and some other countries and the Indian aviation industry could not grow with such taxation. (More

http://www.business-standard.com/generalnews/news/jet-airways-in-talksstar-alliance-skyteam/21583/

Foreign airlines give a muted response to higher FDI cap

Find Indian market lucrative, but sceptical about investment in the sector

There seems to be little enthusiasm among international airlines over the government’s plan to allow them to pick 49 per cent stake in their Indian counterparts.
In spite of a high and sustained growth in passenger traffic, the financial strength of almost all Indian airlines is severely affected, leading foreign carriers to be disinclined to invest at the moment.

Top aviation officials, who had met at the 68th annual meet of the International Air Transport Association (IATA) in Beijing last week, spoke about strict regulations, lack of reforms and the government’s backing to Air India as factors which came in the way of competition.

“We have been hearing it (allowing foreign airlines to invest) for five years. India is an attractive destination for us to serve, but I am not sure if India will be an attractive destination for us to invest in,” Willie Walsh, chief executive of International Airlines Group, which owns British Airways and Iberia following their 2011 merger, said.

He said a major reason was the “continued financial support” of the Indian government to Air India, which “in my mind distorts competition”.

“Part of the problem that exists in India is the financial viability of the airlines, which is caused by the Indian government continuing to support the inefficient state-owned airline,” Walsh said.

“Anybody who is looking at India now is going to say it’s going to be an extremely difficult proposition. There is a reward, access to a vast market, but the execution of that is the question,” said Tim Clark, president of UAE carrier Emirates.

“You cannot afford to let civil aviation be a lame duck, not in something the size of India. You will have to find a way to make it work,” he said.

Azran Osman, chief executive of Malaysian low-cost carrier Air Asia, said, “You have got to address that big white elephant, Air India. If it continues to behave the way it is, you can make it 100 per cent foreign ownership, and no one’s going to be attracted.”

However, Bruce Ashby, CEO of the global airlines’ group ‘Oneworld’, struck a different note saying it was possible that some foreign carriers may invest in India.

“Recently, we have seen foreign carriers put their money into other foreign carriers around the world. It is possible. But I do not have any specific airline in mind when I say that. It is certainly possible because we see that happening in other places,” Ashby, who once headed no-frill carrier IndiGo, said.

A proposal to allow foreign carriers to own up to 49 per cent in Indian airline companies has been pending for several weeks now for consideration by the Union Cabinet.

The Trinamool Congress, a major partner in the ruling UPA coalition, is opposing this move.

http://www.business-standard.com/india/news/foreign-airlines-givemuted-response-to-higher-fdi-cap/477664/

Flight diverted to Cochin airport

Bad weather conditions in Mangalore

An Air India Express flight from Dubai, scheduled to land at Mangalore, made a landing at the Cochin international airport here at 7.10 a.m. on Sunday 7.10, drawing passengers' ire.

Airport officials said the flight, IX 814 carrying 174 passengers on board, which was to land at the Mangalore airport was diverted to Kochi owing to bad weather conditions.

Leaving hundreds of passengers stranded at the airport for nearly eight hours, the crew went for the mandatory rest after their flying hours.

Irate passengers complained of lack of facilities on the part of the airline.

They said there was no communication from the crew about the time of departure.

Later the flight took off from here to Kozhikode at 4.15 p.m., sources added.

Last year an Air India Express plane from Dubai crashed and caught fire after it overshot the runway while trying to land at the Mangalore airport.

http://www.thehindu.com/todays-paper/tp-national/tp-kerala/article3541365.ece

Air India plans to train more pilots: Ajit Singh

Union Minister for Civil Aviation Ajit Singh on Sunday said Air India was planning to induct and train more pilots in the wake of the stir by pilots. He stressed the need for the airline to become competitive with the rest of the industry for its survival.

Talking to journalists on the sidelines of a book release function here, he said: “I don’t understand why they are on strike. There are no issues.” Whatever few issues they had, the Dharmadhikari report was meant to address them. “We have already started discussions.”

Mr. Singh pointed out that pilots did not give any strike notice and the court had called it ‘illegal.” He asked them to get back to work.

He recalled his assurance to Parliament that the government would not be vindictive and listen to “their problems” if the pilots returned to work.

Referring to the Cabinet nod for a Rs.30,000-crore package for making Air India viable, he said there were many milestones to be reached. “Nobody is going to give any more public money to Air India. Pilots need to understand that it was in their own interest to revive Air India.”

http://www.thehindu.com/todays-paper/tp-national/article3540932.ece

Ajit Singh favours FDI in retail, but with regulations

Hyderabad June 18:

The Union Minister for Civil Aviation, Mr Ajit Singh, on Sunday said he was in favour of FDI in retail, but cautioned that there had to be regulatory mechanism to protect the interest of the farmers.

“FDI in retail is important, as farmers will get better prices by selling their produce to big stores. But unless there are laws to protect their interest, farmers will be cheated,” he said at a function to mark the release of a Telugu book on farmers authored by Mr Vadde Sobhanadreeswara Rao, former Agriculture Minister.

Displaying his passion for farmers’ interest, the Minister took a dig at political leaders across the political firmament, including those in power today, for ignoring the plights of the farmers. “Farmers’ issue is no more an issue today that is discussed seriously in parliament. Politicians are today not interested in this issue. Very few people who run the government are even aware of the Swaminathan Committee report,” he said.

He said elections are not contested today, but fought. “If you buy votes, you do not have to know about any issue (such as farmers’ issue) or discuss it. Today debates (in Parliament) are more on interest rates, taxes and petrol prices,” Mr Singh said. He hoped that the Election Commission would succeed in eliminating the role of money in elections.

Pointing out that members of farmers’ families were increasingly getting out of farming, he said this was because the younger generation did not wish to stay back in their villages to continue farming due to lack of adequate facilities there. “Farming has prospered in India, but not farmers,” he said.

http://www.thehindubusinessline.com/industry-and-economy/marketing/article3539913.ece

Air India readying plans to induct, train new pilots

Hyderabad, June 17:

Air India is putting together a business plan to counter the impact of the on-going pilots strike and resume full services.

The plan includes induction and training of new pilots to put its larger aircraft such as B 737s and A 320s back to the skies.

Currently, the carrier is flying 38 of its scheduled 45 flights on account of the strike.

“Even now, we invite the striking pilots back to work and we are willing to discuss. But we are not waiting (any more)” Mr Ajit Singh, the Union Civil Aviation Minister, told media persons on the sidelines of a book release function here on Sunday.

He said it would take three to six months of training to make pilots capable of flying the larger aircrafts such as B737s and A320s.

Asked whether the measures such as sacking the striking pilots were being considered, he replied: “The Government will not be vindictive. It is in their (striking pilots') interest to resume duties. If they do not, what else can we do?”

Terming the strike as illegal, he pointed out that even the High Court had directed them to resume work.

“There are no major issues. Whatever few issues (there are), the Dharmadhikari report is meant to address these. We have already started discussion. It seems they are not willing to come back to work.”

Mr Singh said the Government has approved a Rs 30,000-crore package to revive the carrier.

“The government will give no more public money to Air India. It (the carrier) should become competitive with the rest of the industry, for otherwise, it cannot survive for long. The (striking) pilots should understand that their survival depends of Air India's survival.”

When pointed out that some foreign airlines dubbed the proposed 49 per cent FDI in Indian aviation as unviable, the Minister made it clear that managements of domestic airlines will remain in the hands of Indians.

“We are not asking anybody (foreign airlines) to take it (FDI offer). It is not compulsory. Those who do not want it, it is their prerogative,” he said.

http://www.thehindubusinessline.com/industry-and-economy/logistics/article3539918.ece

Foreign airlines lukewarm to proposal for FDI in domestic aviation

Recently in Beijing:
Global airlines are not overly enthused by the Indian Government's proposed move to allow foreign airlines to acquire stake in domestic carriers.
The Government is expected to take a call soon on allowing foreign direct investment (FDI) in the domestic aviation sector. The proposal has already been sent for inter-ministerial circulation before being placed before the Union Cabinet for a final decision.
Pointing out that he had been hearing about the proposed policy change for at least five years, the Chief Executive Officer, International Airline Group (IAG), Mr Willie Walsh, said India was an attractive destination for British Airways to “serve” although it might not be an attractive destination to invest in.
“The reason is that the Indian Government continues to provide financial support for Air India which, in my mind, distorts competition. Part of the problem in India is caused by the Government's continued support to the inefficient state-owned airline,” he said on the sidelines of the recently concluded annual general meeting of the International Air Transport Association.
He added that if there was a change in Government policy, IAG would look at it. IAG is the holding company of British Airways and the Spanish carrier, Iberia. It is one of the world's largest airline groups, with 400 aircraft flying to over 200 global destinations.
Stating that it was possible for international airlines to look at investing in India, the Chief Executive Officer, OneWorld, Mr Bruce Ashby, pointed out that foreign airlines investing in domestic carriers was something that happened around the world.
The President of Emirates Airlines, Mr Tim Clark, said that from an “arm's length”, investing in an Indian carrier seemed okay. “But then if you work the practicalities (like) high fees at the airports, then it does not look that attractive,” he added.
Despite the lukewarm response, Kingfisher and SpiceJet are among the Indian carriers that have attracted foreign airlines' interest.
The Chief Executive Officer, SpiceJet, Mr Neil Mills, told Business Line recently that airlines from the Gulf and South-East Asia had shown “speculative interest” is acquiring a stake in the carrier.
http://www.thehindubusinessline.com/industry-and-economy/logistics/article3539968.ece