AAI’s move a jolt for ground-handling firms

The Airports Authority of India’s (AAI) decision to increase the charges for ground-handling services across 60 of its airports, including those in the State, from Wednesday has come as a setback to the airline companies.

The ground-handling agencies will now have to pay between 32 to 36 per cent of their revenues to AAI compared to the 13 per cent they had been paying till July 31.

The increase in charges has come at a time when the airlines were finding it difficult to tide over the increase in Aviation Turbine Fuel costs, that was hiked twice this year, and other taxes.

Criticism

The haste in which the AAI implemented the decision, which was taken in June, without giving adequate time for the operating airlines has come in for criticism.

Ground-handling services include check-in, baggage handling, cargo handling, cleaning of aircraft interiors, loading and unloading of food and beverages on aircraft, providing electricity back-up to aircraft while they are in the tarmac, supplying water, and transporting passengers to and from planes to the terminal building and maintaining the toilets.

Airline officials are of the view that the increasing of the charges will increase operating costs as the ground-handling agencies will pass on the costs to the airlines which in turn will pass it on to the passengers.

The Thiruvananthapuram and Kozhikode international airports are managed by the AAI.

Three agencies

The AAI has also designated three agencies to carry out ground-handling services in 60 of its airports as deemed necessary under the new ground-handling policy.

The new policy aims at eliminating outsourced manpower and restricting the number of service providers operating at airports to improve service standards, safety and security.

Royalty to AAI

The Delhi-based Bhadra International India, which has been designated as one of the ground-handling agencies, had been paying 32.8 per cent royalty to AAI. Other agencies had been paying around 13 per cent, an official of a ground-handling agency said. Since February, Air India, its subsidiary AISATS, and Bhadra have been carrying out ground-handling activities of foreign airlines at airports in the country through their bona fide personnel. The orders have been issued under provisions of the Airports Authority of India Ground Handling Services (Regulations) 2007 and as part of strengthening security in sensitive areas of the airport, mainly the apron side and terminal.

Airport company claims nod for project

The steering committee on greenfield airports, chaired by the Civil Aviation Secretary, has given final approval for the proposed KGS Aranmula International Airport Limited at Aranmula, said Gigi George, managing director of the company, here on Friday.

In a statement here, Mr. George said a steering committee meeting in New Delhi on Friday gave a clear go-ahead for the airport and the project work would begin soon.

He said the proposed airport at Aranmula would be ready by December, 2014.

Secretaries of the Civil Aviation, Home, Defence, Economic Affairs, Revenue, Planning Commission, Director-General of the Indian Meteorological Department, Director-General of Civil Aviation, and the Chairman of the Airports Authority of India attended the steering committee meeting, said Mr. George.

He said Malaysian Airport Holdings Berhad (MAHB) would be the technical and strategic partner of the project. He said the MAHB had also agreed to provide operation and maintenance services.

Mr. George said AECOM, global provider of professional technical management support services, had prepared the master plan and design of the project and the London-based Ernst & Young, the traffic and financial analysis report.

The airport project, estimated to cost Rs.2,000 crore, would be ready for operations by December, 2014. He said the company had already obtained all necessary approvals required for the project.

‘Aeropolis’ planned

KGS Group is also planning to develop a modern ‘aeropolis’ attached to the airport in a special economic zone. The aeropolis will house a multi-specialty hospital, shopping mall, star hotels, and an international school, Mr. George said.

He said the company had purchased nearly 500 acres at Aranmula for the airport project and the government was likely to have a minority stake in the project.

Mr. George said the company opened its project office at Aranmula on Friday.

Levy of airport development fee slammed

Despite explanations from the Civil Aviation Ministry and Delhi International Airport Limited (DIAL), the Comptroller and Auditor-General has criticised the charging of development fee on passengers at the Indira Gandhi International Airport, saying the levy has violated the bid conditions and given Rs. 3,415 crore in monetary benefit to the operator.

In its report tabled in Parliament, the CAG has said that whenever the GMR-owned DIAL raised an issue of revenue to go to it or expenditure to be debited to the government, the Ministry and the Airports Authority of India (AAI) had always ruled in favour of the operator and against government interest, in contravention of the Operation, Maintenance, Development Agreement (OMDA).

The report says DIAL can potentially earn Rs. 1,63,557 crore over a 60-year-period from the land leased out to it at Rs. 100 a year, with an equity investment of just Rs. 2,450 crore. GMR Infrastructure holds 54 per cent stake in DIAL, and the AAI has the rest.

The joint venture company, the CAG points out, shall meet all financial requirements through suitable debt and equity contributions to comply with its obligations, including the development of the airport. However, the Ministry, through its February 9, 2009 order, allowed DIAL to levy a development fee for financing the upgrade, expansion or development of the airport. This order violated the provisions of Article 13.1 of the OMDA, the AAI Act and the Airport Economic Regulatory Authority (AERA) Act, as confirmed later by the Delhi High Court.

“This decision to levy development fee, after the effective date, has vitiated the sanctity of the bidding process, as the draft OMDA, part of the bid documents, does not mention funding of the project cost… through levy of development fees. In case the joint venture was to have been permitted to levy development fee to finance the project after signing the OMDA, this important condition should have been known upfront to all the bidders at the time of bidding,” the report notes.

The approval of the Ministry, and later of the AERA, for the levy of development fee (to bridge the funding gap) was a post-contractual benefit given to the DIAL. This was neither envisaged in the request for proposal (RFP), nor included in the provisions of the OMDA or the State Support Agreement. This led to an undue benefit of Rs. 3,415 crore to the DIAL, at the cost of passengers.

The CAG has asked the government to investigate all cases of post-bid concessions and fix responsibility. It has recommended that all public-private arrangements be linked to certain basic triggers such as traffic volume, tariff, return on investment and break-even point.

‘Eye-in-the-sky’ likely to touch down Next week

India took custody of the first airborne early warning and control (AEW&C) aircraft (EMB-145I) at Embraer’s headquarters in São José dos Campos, Brazil, on Friday.

Built on a modified Embraer, the yet-to-be-named AEW&C aircraft was handed over by the Embraer Defence and Security officials to senior scientists from the Defence Research and Development Organisation (DRDO).

Military sources told Express that the AEW&C was expected to leave Brazil on Saturday and reach the HAL airport on Sunday or Monday. The focus will now shift to Bangalore-based Centre for Airborne Systems (CABS), which will equip the eye-in-the-sky-aircraft with mission systems.

Embraer says the delivery follows successful completion of ground and flight tests of the aircraft which met operational targets.

Embraer termed the project as a new chapter in Indo-Brazilian ties, cementing the way for more future complex programmes.

“We are very proud to meet the expectations of our clients in providing the CABS and the DRDO with this platform,” Embraer Defence and Security president Luiz Carlos Aguiar said.

“The EMB-145I features an in-flight refueling system and upgraded electric cooling equipment. The comprehensive set of structural changes in the aircraft will enable easy installation of advanced mission systems developed by CABS,” DRDO chief controller G Elangovan said.

The IAF will receive three EMB-145Is as per the 2008 pact India inked with Brazil. The total cost of the project is now put at `2,157 crore, after incorporating all the additional requirements of the IAF.

“The CABS would require over six months to prove its mission systems on EMB-145I after which the IAF would officially induct the platform,” sources said.

The fully-loaded EMB-145I would begin test-flying in Bangalore in October/November this year.

The ability of EMB-145I to detect, identify and classify threats presentin the surveillance areas and act as a command and control centre to support air operations is expected to add teeth to the IAF’s network-centric warfare capabilities.

Former Chief of Air Staff Air Chief Marshal (retd) F H Major said the EMB-145I would be a tremendous force-multiplier to the IAF. “It will augment the entire air defence surveillance system of the country and and also aid long-distance monitoring,” Major told Express from Delhi.

As reported by Express earlier, the EMB-145I could track aircraft, UAVs and even detect radar signals. It can scan up to 400 km, giving the IAF recognised air situations thereby enabling battlefield management. The aircraft can operate with a maximum crew of 12 people, including operators, rest crew, pilot, co-pilot and flight test engineer. It can fly non-stop for 10-12 hours with mid-air refueling.

Domestic air traffic falls 5% in June: Portals

Higher ticket prices and lower capacity led to a decline in the number of airline passengers in June, according to various online travel portals.

The Directorate General of Civil Aviation (DGCA), which is yet to release the data for June, had said passengers flown by domestic airlines had declined to 5.44 million in May 2012, against 5.49 million in the year-ago period, a fall of one per cent. “Domestic passenger traffic seems to have fallen about five per cent year-on-year because of increased fares, which are 30 per cent higher than last year,” said Sharat Dhall, President (online), Yatra.Com.

Given online travel portals account for 15-18 per cent of total domestic airline ticket sales, the overall fall in airline passenger traffic could be about one per cent, said an aviation expert.

Noel Swain, executive vice-president (supplier relations), Cleartrip.com, said, “On an average, fares have risen 20 per cent, including the service tax. Fares to/from Delhi have risen 26-27 per cent because of the imposition of a user development fee. The industry was expecting four per cent growth in domestic air passenger numbers in the quarter ended June. However, growth would be flat or lower by one to two per cent. Traffic for June would be four-five per cent less.”

Though Dhall did not specify the total number of seats offered by airlines in June compared to seats offered in the year-ago period, according to his estimates, the total supply volume would be about 25 per cent lower.

Vikram Malhi, Expedia’s country head, stated, “Domestic tourism became a collateral beneficiary of the slide in the rupee, and April and May, being the peak season, greatly benefited from this. However, despite the shift in the focus of Indian travelers, compared to May, June saw the number of air travelers fall 12-14 per cent.” This summer, airfares rose 15-20 per cent, he added.

In 2011, the number of domestic passenger rose 16.6 per cent to 60.7 million, averaging 5.1 million passengers a month. This was 74 per cent higher than 2006 levels, according to a Centre for Asia Pacific Aviation (Capa) report released in December 2011. Capa expects domestic passenger traffic would rise eight-10 per cent in 2012-13, while growth in capacity would be seven to eight per cent, against 15.1 per cent in 2011-12.

Kingfisher Airlines has cut its capacity sharply, operating only 12-13 aircraft and 90-100 flights a day in its summer schedule. Last year, the airline operated 66 aircraft. Now, its fleet size is down to 44. Jet Airways, too, is not planning any capacity addition in narrow-bodied aircraft. “The fleet will remain, more or less, the same for the next 12-24 months,” stated a senior Jet executive.

In a research report last month, Rashesh Shah, an ICICI Securities analyst, wrote, “The Indian aviation sector is entering a low-growth phase, with passenger traffic moving into single-digit growth due to higher ticket prices and last year’s high base effect. However, massive reduction by Kingfisher and the ongoing Air India pilots issue continue to aid other private carriers in maintaining healthy load f

Captain GR Gopinath to launch regional airline in Gujarat -'Deccan Shuttle'

NEW DELHI: Captain GR Gopinath, the man who gave us air travel on a platter, will return to the aviation business for a third time by launching a regional airline in Gujarat on Monday. The airline, Deccan Shuttle, will start 12 flights a day between nine cities such as Ahmedabad, Surat, Jamnagar, Bhavnagar and Kandla with five 12-seater Grand Caravans. All these cities are connected to Mumbai by air, but have no services between them, he told ETon Saturday. Gopinath's latest venture coincides with a series of launches of small and regional airlines in India. Air Mantra, a unit of financial services conglomerate Religare Group, has started daily flights connecting Amritsar and Chandigarh in July. Air Pegasus, promoted by Shyson Thomas of Decor Aviation, an airport ground-handling agency, is looking to become south India's first regional airline in October.

RAHI Aviation Inspired Realities (RAir), an offshoot of RAHI Aviation Holdings, a Bangalore-based aviation infrastructure and allied air services company, aims to begin services early next year. Spirit Air, which, provides service to Jamshedpur and Ranchi from Kolkata, plans to reach out to tourist destinations such as Gaya and Kushnagar later this year.

Waiting in the wings are Karina Airlines, Volk Air, Air Freedom and Akashganga Airlines, among others. Non-resident Indians in the Gulf are about to resurrect plans to launch a carrier called Air Kerala that will connect the state to the Middle-East.

As anyone trying to fly between the smaller cities in India would say, it's not easy to get from here to there and back. Even states such as Himachal Pradesh and Uttarakhand, which are key tourist destinations, have negligible air services to their many scenic and religious attractions, according to the Centre for Asia Pacific Aviation, a leading consultancy. The launch of these airlines could answer the connectivity problems.

It also means that Indian aviation is again having a moment after about four years of skulking in the corners of a slowdown. Yet, the action comes at a time few were expected to touch the sector with a barge pole. India's biggest airline by market share, Jet Airways, and low-fare rival SpiceJet posted profits in the June quarter, but these are still early days to suggest that aviation has emerged from the shadow of troubles sown by soaring fuel prices and a weakening rupee. Even for a sector that has always been inherently risky, the last two years have stood out as an absolute nightmare, with Indian carriers losing a combined $2 billion. Kingfisher Airlines, which once embodied aviation's glitz and glamour, is gasping for breath and fighting for survival.

Civil aviation ministry, DIAL face the heat

Slamming the levy of airport development fee (ADF) on passengers, the Comptroller and Auditor General (CAG) on Friday said the civil aviation ministry had violated bid conditions, giving benefits of Rs 3,415 crore to Delhi International Airport Limited (DIAL), in which the GMR Group holds majority equity stake.

The ADF benefit was given to DIAL to bridge the financing gap between the airport’s actual and original project costs. The CAG report said DIAL also secured land valued at Rs 24,000 crore for commercial use at a lease rental of Rs 100 a year, and this could potentially lead to DIAL earning Rs 1.6 lakh crore over 60 years.

“According to the operation management development agreement (OMDA), it was the responsibility of the joint venture company to bring in equity. Levy of development fee is against the OMDA,” A K Patnaik, additional deputy, CAG.

WINGS UNDER FIRE

CAG Land (240 acres) valued at Rs 24,000 crore given to DIAL at Rs 100 lease rental per year for commercial utilisation with an earning potential of Rs 1.6 lakh crore   DIAL got post contractual benefit of Rs 3,400 crore by levying ADF (Airport Development fee) on passengers

DIAL Calculation of Rs 1.6 lakh crore erroneous as 20-25 years required to completely develop the land for commercial usage   AERA allowed the levy of ADF taking into account SC judgment. Levying of ADF cost DIAL Rs 546 crore loss of revenue per year

However, according to the civil aviation ministry, the calculation of presumptive gain from the commercial use of land at the Delhi Airport is totally erroneous and misleading. In fact the net present value of the figure quoted by CAG is Rs 13,795 crore. CAG has further failed to appreciate that 46 per cent of this amount would be payable to AAI as revenue share.

No undue benefit was accrued to DIAL after the agreement, said a DIAL spokesperson. The Airports Economic Regulatory Authority had reviewed and allowed the levy of ADF at Delhi airport after taking into account the Supreme Court’s judgment, he added. “As the Airports Authority of India could not infuse equity in the project, the ADF was imposed. Also, the development fee is utilised strictly for debt repayment. Had AAI infused equity in the project, DIAL would have been getting 16 per cent return on that. The imposition of ADF meant a loss of Rs 546 crore of revenue a year,” the DIAL official added. The right to use five per cent of airport land (240 acres) for commercial purpose was stated in the OMDA between AAI and DIAL. A DIAL official said, “It would take 20-25 years to completely develop the land for commercial usage, and it makes the calculation of Rs 1,63,557 crore erroneous. The allocation of five per cent land for commercial usage was a bid condition.”

The CAG report stated the note to the Cabinet seeking nod for the joint venture envisaged concession for 30 years, which could be extended by another 30 years, subject to a “mutual agreement and negotiation of terms”. But the OMDA didn’t contain any provision of “mutual agreement and fresh negotiations” before extension of the concession period, it added. DIAL officials, however, denied this.

IndiGo flies past Jet to become largest airline

The country’s youngest airline has become its largest. Low-cost carrier IndiGo, which began operations this month in 2006, has overtaken Jet Airways in terms of passengers flown.

NEW PECKING ORDER
Carrier	Market share in %		Fleet size
	July, ‘12	June,’12
IndiGo	27.0	26.0	58
Jet	26.6	27.4	101
Air India	18.2	16.8	100
SpiceJet	17.8	18.6	47
GoAir	7.0	6.9	13
Kingfisher	3.4	4.2	20
Fleet utilised for both domestic and international operations;  Source: DGCA data

In a market where many airlines have dithered on bringing in new aircraft, IndiGo has consistently expanded its capacity. For instance, the airline increased its capacity by 29 per cent between October, 2011 to June, 2012. During the same period, Kingfisher’s capacity shrank by 68 per cent.

According to the latest figures released by the DGCA, IndiGo, with 27 per cent market share in July this year, has edged past Jet, which managed 26.6 per cent share. The market shares of Jet Airways and JetLite were 19.4 per cent and 7.2 per cent, respectively.

Kapil Kaul of Centre for Asia Pacific Aviation said while “IndiGo has increased weekly capacity by over 30 per cent in a year, Jet Airways has been moderating its domestic capacity growth over the last few years with capacity growth coming largely due to changes in aircraft configuration, which increased more seats with the launch of Jet Konnect. IndiGo has gone for a long-term expansion plan instead of getting swayed by short-term changes in the market. That has paid off”.

The combined market share of all the low-cost carriers, IndiGo, JetLite, SpiceJet and GoAir, in July hit 59 per cent, marginally up from 58.2 per cent last month.

Air India increased its share from 16.8 per cent in June to 18.2 per cent in July. The market share of Jet (26.6 per cent) declined by one percentage point.

Kingfisher saw its share decline to 3.4 per cent from 4.2 per cent in June. For SpiceJet (17.8 per cent share), the fall was by 0.8 percentage point.