Air India Engineering unit to start maintenance & repair work from November

Mumbai The hived off engineering unit of state-run Air India will be operationalised within two months, the national carrier has said. Beginning November, Air India Engineering Company will start taking up maintenance repair and overhaul(MRO) jobs for the parent carrier as well as for other airlines. Air India, too, will have to pay for the services, unlike in the past when it was not billed by its engineering division.

"A fully-owned subsidiary of Air India for engineering alone will allow quick decision-making required for engineering jobs, which an airline's board might not be quick to take," said Sanjeev Rotkar, executive director, MRO, special business division, Air India.

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/air-india-engineering-unit-to-start-maintenance-repair-work-from-november/articleshow/16550786.cms

After Air India and Jet Airways, IndiGo cuts ticket prices by up to 40% to lure travellers

NEW DELHI: Airlines have declared a full-blown price war to entice more passengers this festival with budget carriers IndiGo becoming the third to offer up to 40% discounts on a month's advance booking, after Air India and Jet AirwaysBSE 1.33 % did so a few days ago.

SpiceJetBSE 6.47 %, the third-largest airline in terms of market share, is also expected to announce a similar move shortly, two travel industry sources said.

Though these discounts are a much-needed respite for passengers who have either reduced air travel or have shifted to other modes of transport due to high airfares this year with the removal of Kingfisher Airlines' capacity, airline players think this may impact their financials.

"Discounting fares in an already depressed yield market when costs are rising is not welcome news and it will put a lot more pressure in the airline sector. But I don't believe it will impact our financials as much as last year due to the fact that capacity has come down across the industry and we expect a strong holiday season in both international and domestic markets," a senior executive of Jet Airways told ET.

Last Thursday, Air India came out with the 'Jaldi Jaldi' scheme, offering passengers up to 40% discount on various routes while Jet Airways came up with similar discounts a day later.

Under 'Jaldi-Jaldi', tickets booked 30 days in advance on Mumbai-Goa sector would cost Rs 2,970, Mumbai-Delhi Rs 4,931, Delhi-Srinagar Rs 3,516, Kolkata-Delhi Rs 4,818 and Chennai-Port Blair Rs 4,378, inclusive of taxes.

Similarly, IndiGo is offering return fares of Rs 9,591 on Delhi-Mumbai, Rs 10,202 for Delhi-Bangalore, Rs 9,954 for Delhi-Hyderabad, Rs 9,425 for Delhi-Kolkata, Rs 9,950 for Delhi-Chennai.

Fares on these routes have been otherwise ranging anywhere between Rs 6,500 and Rs 9,000.

Sector experts also think that this is a strategic move to get more passengers in the festival season as the loads or aircraft occupancy has been very low over the past few months.

"Airline inventory is a perishable commodity and everybody has been having lesser loads due to higher fares. It's better to sell some cheap tickets and then make up by raising fares as the flight date comes close so that more seats are sold. This is good for consumers as it would encourage leisure travellers," global travel portal Expedia (India) Marketing Head Manmeet Ahluwalia said.

There are contrarians who believe that this time it is different. "I don't expect any fare wars in the near term. No one is interested in ruining the market again. The era of loss leadership pricing is over," said Kapil Kaul, CEO, South Asia, Centre for Asia Pacific Aviation.

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/after-air-india-and-jet-airways-indigo-cuts-ticket-prices-by-up-to-40-to-lure-travellers/articleshow/16550544.cms

Air India planning to deny VRS to productive employees

NEW DELHI: Air India's planned voluntary retirement schememight turn out to be far less voluntary than imagined, with the airline planning to reject applications of its productive employees.

The finalisation of the VRSprocess itself - through which the national carrierexpects to save 375 crore per annum for the next five years in wage bill - has been delayed since the government and Air India are working hard to retain talented people.

"We plan to undertake a screening of all (VRS) applications by immediate bosses as part of the VRS, so that only those whose performance are not up to mark leave the company and not the fruitful workers, that too in such difficult times," a senior AI official told ET.

Corroborating this view, an official from the civil aviation ministry said that since the airline is looking to reduce flab, it doesn't want to replace outgoing people.

"If we have to make fresh recruitments, then the purpose of reducing staff costs and cutting flab will be lost. We want to improve the airline's financial position with better performance and we need our able employees for that," said an aviation ministry official said.

Although both the airline and hundreds of employees are looking forward to the offer, the government needs a go-ahead from both the Cabinet and the department of expenditure, since 1,100 crore more is needed before the scheme can be kicked off.

The airline has a staff strength of 27,000 and the highest aircraft to manpower ratio anywhere in the world of 1:280, which is expected to come down to 1:150 by the recent hiving off of ground handling and maintenance businesses of the company into separate unit. With VRS, this ratio is expected to further reduce and conform to industry standards of 1:100, according to the ministry official.

The VRS is targeted at AI employees who have either completed 15 years of service or are 40 years of age. They would be offered compensation equivalent to the salary for 35 days for each completed year of service and compensation equivalent to the salary for 25 days for every year of service remaining. The VRS option would be offered to cabin crew as well as administrative and clerical staff in an effort to reduce age profile of employees and their corresponding salary levels.

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/air-india-planning-to-deny-vrs-to-productive-employees/articleshow/16550639.cms

DGCA keeping watch over Kingfisher Airlines' financial health

MUMBAI: The Director General of Civil Aviation said it is monitoring the financial health of Kingfisher AirlinesBSE 4.22 % along with other procedural lapses that popped up during the safety audit conducted by the regulator recently.

"Financial issues at an airline may sometime also become safety issues and we are keeping a watch on Kingfisher as it has some unpaid dues to its pilots," said Arun Mishra, DGCA.

The regulator said the audit did not throw up serious safety issues for both Kingfisher and Air India Express, but both these airlines are violating some established procedures.

http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/dgca-keeping-watch-over-kingfisher-airlines-financial-health/articleshow/16550916.cms

Domestic carriers launch fare war ahead of festive season

After AI and Jet slashed ticket prices, low-cost carriers respond with 5-20% cuts likely to spur air travel market's sluggish growth

Low-cost air carriers IndiGo, SpiceJet and GoAir have cut fares by five to 20 per cent, the latest move in a price war this festive season between them and their full service counterparts, Jet Airways and government-run Air India (AI).

Over the past six months, air fares had gone up 30 per cent, thanks to the reduction of rival Kingfisher's fleet to a bare minimum and the cap in capacity expansion by most airlines.

AI broke the ranks last Friday, dropping the basic fare on all domestic routes by 40 per cent, provided customers bought the ticket 30 days in advance. Jet did likewise a day later.

Responding, the LCCs have also quietly dropped fares. While IndiGo, SpiceJet and GoAir are not talking, travel portals have confirmed their counter-move. Says Sharat Dhall, president of Yatra.com, “Consequent to AI's dropping of fares, the other airlines have dropped these for dates of travel more than a month out. LCCs have dropped their fares by 10 to 12 per cent." He said this would spur demand, which had become sluggish in the last quarter.(FARE FALL)
A top executive of Makemytrip.com, the country's largest travel portal, said the LCCs’ fare cut ranged from five to 20 per cent.
Effectively, the AI price cut on only its basic fare leads to a fall in the total fare by 10 to 20 per cent. The base price is 20 to 35 per cent of the total fare, depending on the route; the rest are taxes and fuel surcharges, among other fees.
The festive season, the October-November period, contributes 25 per cent of the total aviation customer base, starting Dussehra.
Experts say the fare battle has begun primarily to induce passenger demand. This had slowed in recent quarters, leading to worry of the market shrinking.
Domestic air traffic during July fell 1.1 per cent compared to a year before, the worst performance for any market, reflecting the weakening economy among other factors, the International Air Transport Association said. Compared to last August, passenger traffic fell 8.7 per cent in 2012.
While 4.78 million passengers flew in August 2011, the number declined to 4.37 mn last month, according to the directorate general of civil aviation.
Executives in the travel portals say it is possible the airlines might sell their inventory (usually done seven to 14 days before a flight) at a higher price to offset the tickets sold at a discounted price and might not lose money.
Jet has introduced new 21-day and 30-day apex fares, offering attractive savings on several domestic routes. The travel validity for the 21-day apex fares are valid till October 18; the 30-day apex fares have no expiry date.
Full service carriers have been steadily losing market share to LCCs, and the price move, apart from improving the passenger load factor, could help them grab market share. Budget carriers IndiGo (at 27.6 per cent) and SpiceJet (at 18.5 per cent ) have been gaining market share at the expense of Jet (25.2 per cent). In July, IndiGo (27 per cent) displaced Jet (26.6 per cent) as the market leader in passenger share.
http://www.business-standard.com/india/news/domestic-carriers-launch-fare-war-aheadfestive-season/487548/

Mallya keen on closing deal with Diageo this time around

Clear intent on both the majors' parts to align but speculation rife as to how the deal will be structured

Speculation abounds on how Vijay Mallya will structure a deal to offload a strategic stake in United Spirits (USL) to global spirits major Diageo, even as more possibilities emerge about this game-changer, cross-border transaction playing out over the next few weeks.

While there is a clear intent on both the majors’ parts to align moons, intense negotiations, factoring in myriad prospects, are taking place.

One outcome could be that Diageo acquires close to half of what Mallya holds in USL, around 28 per cent. With this, Mallya would be creating a structure similar to that in United Breweries, where he and the Dutch brewer, Heineken, hold a 37.5 per cent stake each.

It is understood that Mallya is looking to strike a deal at Rs 1,300 a share, with a 30 per cent premium on the past six-month average of Rs 900 a share. With the deal looking imminent, USL’s stock gained an impressive 8.8 per cent on Tuesday, to close at Rs 1,147.70 a share on BSE, taking its market capitalisation to a little over Rs 15,000 crore. The stock has gained a whopping 76 per cent in the past six months. Diageo would have to shell out Rs 4,000 crore, if it intends to capitalise on USL’s vast India network.(VIJAY MALLYA'S ASSETS)
The other outcome, that Diageo is understood to be pushing for, could be the gaining of control over USL, something Mallya is not in favour of.
It is to resolve this that a battery of investment bankers put their heads together.
A possible solution which emerged was that Mallya cede control of USL at this juncture, with the option of regaining it after a certain period of time. “This will enable Mallya to address the burning issue of ballooning debt at Kingfisher Airlines to a large extent,” an investment banker close to the deal told Business Standard.
In addition, Mallya could look to sell the rest of the treasury stock in USL, worth Rs 1,500 crore, in favour of Diageo, and then shed some of his stake, giving the latter a good holding in USL.
Amid the rumours swirling, Mallya sought to clarify he was engaged in talks with Diageo for a strategic deal, but there was no certainty of a transaction going through. “I cannot disclose anything more than this,” he told reporters here after addressing USL’s annual general meet today.
Mallya and Diageo will also have to work in close coordination with regulators in the European Union on Diageo getting an indirect control over Whyte & Mackay, a wholly-owned subsidiary of USL, which has significant scotch reserves and may lead to a monopolistic situation for Diageo, if the deal sails through.
Saving Kingfisher?
If the sale to Diageo fails, as it did in 2008, then Mallya will have little room to manoeuvre and address the issue of infusing equity into ailing-carrier Kingfisher Airlines. Though there are some monetisable assets of around Rs 2,000 crore in USL to address its leverage issues, Mallya may not be able to infuse equity into Kingfisher.
“It is pertinent that he leverages some of his personal holdings in the group companies — United Breweries, USL or in Mangalore Chemicals & Fertilizers. It is only with these proceeds he can infuse equity into Kingfisher,” an analyst said.
Kingfisher, which was until last year India’s No 2 airline by domestic market share, but is now the smallest among the six main airlines after grounding most of its fleet, has $1.4 billion of debt.
While Kingfisher’s lenders have been putting pressure on Mallya to bring in capital, one analyst said he did not think sale proceeds from a deal for a stake in USL would be injected into Kingfisher.
"This has nothing to do with Kingfisher Airlines," said Sharan Lillaney, an analyst at Angel Broking who tracks both USL and Kingfisher.
"This is solely for USL. Why would he put good money after bad money? They are doing a stake sale basically to get USL out of a high-debt position it is in," he said.
This month, India changed its rules to allow foreign airlines to own up to 49 per cent in Indian carriers, a move long sought by Kingfisher, though no airline has publicly expressed an interest in taking a stake in it.
Shares in Kingfisher, which has never turned a profit, were up 1.5 per cent today and up 35 per cent since the day before India announced the policy change.
But, they are still 96 per cent off their all-time high.
Mallya's other big company is United Breweries, the dominant beer maker in India.
Mallya and Dutch giant Heineken each own 37.5 per cent of United Breweries, and sources said in March that Mallya was considering selling part of his stake to Heineken, although no deal transpired.
Heineken, like other beverage makers, including Diageo, is keen to bolster its presence in fast-growing emerging markets to offset sluggish growth in mature markets and is close to a deal for full control of Singapore-listed Asia Pacific Breweries, the maker of Tiger beer.
http://www.business-standard.com/india/news/mallya-keenclosing-dealdiageo-this-time-around/487659/

Diageo opens talks for United Spirits stake

Diageo, the world’s biggest spirit group, and Vijay Mallya’s UB Group on Tuesday said they are in talks again for a deal under which the UK-based company may pick up stake in United Spirits Ltd. The two companies had discussed stake sale in 2009 but were unsuccessful.

United Spirits said in a filing to the BSE, “United Spirits and Diageo Plc confirm that the UK-based company is in discussion with it and United Breweries Holdings in respect of possible transactions to acquire an interest in the liquor firm.” Diageo, the maker of Johnnie Walker and Smirnoff, also issued a similar statement to the London Stock Exchange. However, both sides maintained there is no certainty of the transaction with the Mallya group keen on retaining management control over the spirit company after the deal. United Spirit has a debt of over Rs 8,000 crore.

UB Group shares surged after the announcement. United Breweries jumped to Rs 132.45, up 19.97 per cent, while United Spirits soared 8.89 per cent to close at Rs 1,147.70 on the BSE. McDowell Holdings climbed 9.95 per cent, UB scrip rose by 7.02 per cent and Mangalore Chemicals & Fertilizers (12.34 per cent). Kingfisher surged 8.08 per cent and UB Engineering shot up by 15.70 per cent.

Bankers are not sure whether Mallya will pump United Spirit sale proceeds into Kingfisher which has a debt of Rs 7,500 crore. “Banks have been insisting that Mallya should bring more funds into the airlines,” said an investment banking source.

The UB Group is the promoter of United Spirits with 27.78 per cent stake while FIIs hold 49.82 per cent stake. The two companies had discussed a deal in 2009, but the talks were unsuccessful. Diageo is reported to be trying to buy 15 per cent stake from Vijay Mallya, who is under pressure to raise capital for Kingfisher Airline. “With a 25 per cent stake, Diageo will have to make an open offer for another 20-26 per cent. Diageo stake will go up to almost 51 per cent. Mallya may not want to give up control. If Diageo doesn’t get control, it may not go for a stake purchase. Another way could be preferential allotment whereby Mallya and Diageo hold equal stakes,” he said.

http://www.indianexpress.com/news/diageo-opens-talks-for-united-spirits-stake/1007914/0

Air India to pay due salary

Air India will pay its employees salaries and allowances to the tune of Rs. 230-crore, pending for the past few months, by September-end. While it would pay the salary for July to all its employees by September 27, it will pay the salary for August to non-licensed category staff which excludes pilots, engineers and cabin crew.

http://www.thehindu.com/todays-paper/air-india-to-pay-due-salary/article3937102.ece

Opening of new Chennai airport terminal faces delay

New Delhi, Sept. 25:  

The opening of the newly commissioned airport terminal in Chennai has been put off till December this year.

Official sources told Business Line that the delay in arrival of three aerobridges to be installed at the international terminal, lack of required Central Industrial Security Forces personnel, and lack of inline baggage machines, are the reasons for pushing back the opening by three months.

The decision to delay the opening of the new terminal building was taken after a survey by Secretary, Civil Aviation, K.N. Srivastava, over the week-end. The Ministry has already sent an invitation to the Prime Minister, Manmohan Singh, to inaugurate the new terminal building.

The Centre had, in April 2007, decided to upgrade Chennai airport to international standards.

Masterplan, design

The Airports Authority of India (AAI) had developed the masterplan and design of the terminal through global architectural design competition.

An inter-ministerial group had approved these plans, which focused on enhancing the runway capacity, apron capacity and the capacity of terminal buildings.

Project cost

The project was sanctioned in August 2008 at an initial cost of Rs 1,808 crore, which was later revised to Rs 2,015 crore.

The project consists of construction of a new domestic terminal building, extension of the existing Anna international terminal and the secondary runway across the Adyar River. After completion of the work, passenger handling capacity at Chennai will increase from nine million to 23 million.

Meanwhile, AAI, which is undertaking the development of Chennai airport terminal, plans to make the airports at Jaisalmer and Bhatinda operational for airlines during the forthcoming winter schedule.

http://www.thehindubusinessline.com/todays-paper/tp-logistics/article3936295.ece

Kingfisher bankers to meet tomorrow

New Delhi, Sept 25:  

The consortium of 17 banks that have funded debt-laden Kingfisher Airlines Ltd (KFA) will meet in Bangalore on Thursday.

The meeting assumes significance, as this would be the first one after the Government revised foreign direct investment norms in aviation and allowed foreign carriers to pick up to 49 per cent stake in domestic scheduled airlines.

There are indications that Kingfisher promoter, Vijay Mallya, will make a presentation to the bankers’ on the turnaround strategy for the ailing private carrier.

Banks are hoping that Mallya would come up with proposals that would lead to equity infusion into the airline.

Either the promoter himself could bring in equity funds or bring an investor into the airline. There is already some talk of UB Group shedding stake in Mangalore Chemicals & Fertilisers to raise funds for reviving KFA. Foreign investors may also be roped in other Group companies such as United Spirits to bolster the finances of the promoters.

The 17-bank consortium has an exposure of about Rs 7,000 crore with KFA.

Bankers’ meeting earlier this month had yielded little results as Mallya did not attend the meeting. The consortium wanted Mallya himself to attend the next meeting on September 27, to present the future course of action.

SBI has already initiated the exercise of valuing the non-core assets of Kingfisher House at Mumbai and promoter’s villa at Goa.

http://www.thehindubusinessline.com/todays-paper/tp-money-banking/article3936321.ece

Mallya confirms stake sale talks with Diageo; UB group stocks on a high

Bangalore, Sept 25:  

Vijay Mallya-owned United Spirits said on Tuesday that it is in talks to sell a stake to the UK-based Diageo Plc, the world’s biggest spirits company. Following this, the shares of United Spirits rose 8.9 per cent to Rs 1147.70, their highest since May 2011. The shares of United Breweries Ltd, United Breweries Holdings Ltd, Kingfisher Airlines Ltd and Mangalore Chemicals & Fertilisers Ltd jumped between 7 and 20 per cent.

“United Spirits and Diageo Plc confirm that Diageo is in discussion with United Spirits Ltd (USL) and United Breweries (Holdings) in respect of a possible transaction for Diageo to acquire an interest in United Spirits. However, there is no certainty that these discussions will lead to a transaction,” a notification to the BSE said. Later, Vijay Mallya, the Chairman of the UB Group which owns United Spirits and UB Holdings, told newspersons that both the companies have been holding talks for a long time. To end market speculation on the possible deal, both the companies decided to issue a joint statement, he pointed out.

The statement was issued minutes before the United Spirits AGM was held. At the AGM, Mallya made it clear to the shareholders that he wouldn’t want to take any questions on the details of the deal because of “confidentiality agreement” between the two companies. Mallya is expected to use the money he gets from selling stake to Diageo to clear off part of the debt in USL whose total gross debt is about Rs 8,140 crore. Analysts say that the UB Group wants about Rs 1,600 per share whereas Diageo has offered between Rs 1,200 and Rs 1,300.

KFA, bank meeting

The consortium of 17 banks that have funded debt-laden Kingfisher Airlines Ltd (KFA) will meet in Bangalore on Thursday. The meeting assumes significance, as this would be the first one after the Government revised FDI norms in aviation and allowed foreign carriers to pick up to 49 per cent stake in domestic scheduled airlines.

There are indications that Vijay Mallya will make a presentation to the bankers on the turnaround strategy for the ailing private carrier.

http://www.thehindubusinessline.com/todays-paper/article3936272.ece

Air India staff to get July salary by Thursday

New Delhi, Sept 25:  

Air India employees will get their July salaries by Thursday, a statement issued by the Ministry of Civil Aviation said on Tuesday. In addition, the August salaries of the non-licensed category of employees, who constitute almost 92 per cent of the airline’s workforce, will be paid by this Saturday, the statement added. Almost a third of the Rs 3,000-crore annual salary bill of the airline goes towards settling wage claims of the licensed category of employees, who are the other eight per cent of Air India’s staff. The airline will pay the productivity-linked incentives for its licensed category of employees for May this year. This will entail an overall expenditure of Rs 230 crore. Pilots and engineers are part of the licensed category of Air India employees, and productivity-linked incentives form almost 70-75 per cent of their monthly salaries.

http://www.thehindubusinessline.com/todays-paper/tp-economy/article3936251.ece