Get ready to pay more for preferred air seats, check-in-luggage & meals

Virtually adopting the U.S. model of imposing extra fee on air passengers, the Civil Aviation Ministry on Monday allowed airlines to charge extra money from passengers for preferred seats, check-in baggage and meals, among other things.
Civil Aviation Minister Ajit Singh has decided to permit scheduled airlines to unbundle certain services and to charge fees for them separately. The services include snacks, drinks (barring drinking water), use of airline lounges, and transport of sports equipment, musical instruments and valuable baggage which have higher carrier liability, says an official statement.This practice was adopted in 2008 by some U.S. carriers which were facing a financial crunch. Their decision to charge money for even the first checked-in baggage received flak from travellers but the practice still continues, generating revenue worth millions of dollars to the airlines.Monday’s statement said the Minister's decision was based on the recommendations of an independent consultant, who opined that unbundling of services became necessary for exercising more control over operational costs and running a successful airline. The objective was to facilitate airlines to offer low base fare for price sensitive travellers and, at the same time, provide a choice to service seekers at a price.The decision would allow passengers to benefit from lower base fares and customise the product to better suit their requirements and budget, while allowing airlines to develop more sustainable operations in an environment of wafer-thin margins, the statement noted.
The airlines would have to file details of services to be unbundled and fees to be charged to the Directorate General of Civil Aviation. “DGCA may not fix fee for unbundled services but shall have the right to intervene and stop charging if regulatory principles are violated by the airlines.”The statement said the airlines would have to maintain transparency and inform the travelling public and agents of what fee they were charging and for which of the unbundled services. The charges would be a fixed amount and announced well in advance by the airlines. These shall not vary with the base fare for a particular flight. Customers should be given the opportunity to pick and choose amenities they want to receive and pay for.
http://www.thehindu.com/todays-paper/get-ready-to-pay-more-for-preferred-air-seats-checkinluggage-meals/article4668544.ece

Gopinath puts airline application on hold, to watch AirAsia India fate first

The founder of low cost flying in India — Captain G R Gopinath of Air Deccan fame — has decided to keep his application for launching a new budget airline here on hold. The ex-armyman will first see the fate of the AirAsia-Tata Sons joint venture startup's fate before moving with his papers. After getting Foreign Investment Promotion Board nod, AirAsia on Tuesday filed a formal application with the aviation ministry to seek clearance for starting the Indian subsidiary. The airline plans to start operations with three to four planes and take the number to 37 in next five years. "The aviation ministry feels that last September when the government relaxed foreign direct investment in the sector, it allowed foreign airlines to invest in local ones. So the government will have to clarify that even start-ups are allowed under the relaxed FDI norms," said sources.
Now, Gopinath is waiting to see the fate of the AirAsia joint venture that is backed by the Tatas with former group chairman Ratan Tata taking personal interest in the project because of his passion for aviation.
"If the aviation ministry stalls or even delays such a formidable combination, then what chance does Gopinath have? So he has decided to wait and watch," said sources.
The aviation ministry has already not shown any interest in Gopinath's proposal to start a new airline with minister Ajit Singh saying that Deccan already has a regional airline licence and should operate that first. "Let him first run that well and then that licence can be extended to a national one," the minister said recently.
The founder of Air Deccan, which was acquired by Kingfisher Airlines chief Vijay Mallya in 2007 for Rs 550 crore, is learnt to have tied up with a foreign airline for his proposed new venture. Aviation ministry top brass points out to the less than favorable commercial success of his aviation ventures like Air Deccan, cargo airline and charter company.
However, free market advocates question this approach by the ministry. "Aviation is a free market. Entrepreneurs are free to launch ventures. If they succeed, good for them, otherwise their fate would be that of Kingfisher's. The government should not pre-judge the fate of a proposed venture to disallow it from even starting," said an airline official.
http://timesofindia.indiatimes.com/business/india-business/Gopinath-puts-airline-application-on-hold-to-watch-AirAsia-India-fate-first/articleshow/19777665.cms

Naresh Goyal rejigs Jet holding structure

: Jet Airways owner Naresh Goyal will rejig the shareholding structure to accommodate his proposed new partner, Etihad Airways. Goyal's Tail Winds, which holds almost 80% of Jet Airways, will transfer a majority of its stake to the founder and will divest a 5% stake to meet Sebi's 25% public float requirements, Jet Airways said in a statement to the stock exchange.
 To comply with the Sebi norms, Tail Winds, an overseas corporate body (OCB) registered in the tax haven of Isle of Man, will seek RBI and FIPB approval. The permission is important as India has derecognized OCBs as a separate class of investor since 2003. And so, these entities can't sell or purchase shares or convertible debentures but could hold such securities and debt instruments if the same were bought before the new rule came into force. The share transfer is expected to have no tax implications as there is no sale taking place between Tail Winds and Goyal, said industry observers.Jet Airways didn't mention the time-frame for selling the additional shares to public but Sebi has set a June-end deadline for complying with the public shareholding norms. Funds and other investors currently hold a 20% stake in Jet Airways, whose shares on Monday closed at Rs 609.60 on the BSE. At this price, the additional 5% stake is worth about Rs 265 crore.
 Tail Winds will divest 5% through offer-for-sale , the preferred route of companies to meet the public shareholding guidelines. India's second largest carrier by market share has called for a shareholders meeting on May 24 to seek their approval on Etihad's proposed Rs 2,058 crore investment in Jet Airways, which would give the Abu Dhabi carrier a 24% stake in the over two-decade old firm. The deal with Etihad will take place after the divestment and share transfer exercise. Jet intends to use the money to repay high cost debt and improve its earnings.
 Etihad will get three seats on the board of Jet Airways and the stake purchase by UAE's national airline will not result in a change of control of the company, the Mumbai-based carrier said. It is learned that Etihad will not have any veto rights.
 Once the entire transaction is over, Tail Winds will no longer hold any shares in Jet Airways and that Goyal will hold controlling stake of 51% in the company, the Jet Airways statement said.
 Conforming to norms
 Naresh Goyal's Tail Winds is an overseas corporate body (OCB) registered in the tax haven of Isle of Man.
 It will transfer most of the 80% stake in Jet Airways to the founder and will divest 5% after taking RBI & FIPB's approvals The clearance is vital as OCBs were derecognized as an investor class in 2003, so they can't buy/sell shares unless they're held before that date.
http://timesofindia.indiatimes.com/business/india-business/Naresh-Goyal-rejigs-Jet-holding-structure/articleshow/19793855.cms
 

Qatar Air, Arabia may be next to invest

: Gulf carriers Qatar Airways and Air Arabia are learnt to be next in line to invest in India after Etihad decided to pick up a 24% stake in Jet Airways for Rs 2,058 crore last week.
 Qatar is learnt to be looking at investing in an existing Indian carrier with SpiceJet and GoAir being the frontrunners . IndiGo continues to tease investors with its most eligible and sought after status but has so far not shown any interest in selling stake to them.
 Highly-placed sources said grounded Kingfisher Airlines also tried to woo Qatar Airways . Sharjah-based LCC (low-cost-carrier ) Air Arabia is learnt to be looking at tying up with an Indian partner for investing in a start-up like AirAsia India JV between the Malaysian budget carrier and the Tata Group."The fight for carrying the growing traffic between India and the West — including Australia , New Zealand and some other far east destinations — has shifted to the Gulf. Air India is the only desi carrier that is hit by the emergence of Gulf carriers as the de facto national airlines of India. European carriers are also going to be hit. Indian LCCs are not that badly hit as their Gulf flights only will be affected somewhat ," said an airline official.
 The Jet-Etihad deal has led to India granting massive flying rights between India and Abu Dhabi, giving a push to Etihad, which in 2011-12 did not even figure in the top 10 airlines in terms of transporting people between India and rest of the world. This despite the fact that five of the airlines in the top 10 list were from the Gulf, led by Emirates and then Qatar, Air Arabia, Saudi Arabian and Oman Air. While Emirates holds the number one or two slot when it comes to flying people in and out of India, Qatar and Air Arabia figured in top five airlines in 2010-11 .
 "The problem was for Etihad as it could not get more capacity to India and increase its market share. The Jet deal will catapult it to the top and make it compete directly with Emirates . Qatar could also follow the same route," said industry sources. While Emirates has 185 flights a week from 10 cities , Qatar has 95 flights per week from 12 cities and Etihad has 63 flights a week to nine cities , a figure which will be ramped up fast.
http://timesofindia.indiatimes.com/business/india-business/Qatar-Air-Arabia-may-be-next-to-invest/articleshow/19793743.cms

Air travel to cost more as airlines freed to charge extra for services

Air travel is all set to cost more as Indian carriers — like their foreign counterparts — are now free to charge passengers extra for almost every service.
 The aviation ministry on Monday allowed airlines to 'unbundle' services —meaning charge extra for blocking seats in advance, check-in baggage, and carrying sports and musical equipment or high value baggage. The list of items allowed for extra charge by aviation minister Ajit Singh will be reviewed in six months.Fallout of this order could be reduced free check-in weight. Domestic flyers are presently allowed to check-in 20 kg and airlines have been planning to reduce this to 15 kg. Airlines have been planning to hike excess baggage charge too, which means a double whammy for flyers.Eco class flyers can use lounges for a feeWhile almost all low cost carriers (LCC) and some full service ones were in favour of reducing free baggage limit, they were waiting for DGCA to first allow pre-booking of seat charges.
 Airlines have now been allowed to allow economy class passengers use their lounges for a fee apart from the common practice of onboard sale of food and beverages, except drinking water in cups (not the bottled variety) which has to be given free. Airlines are going to almost immediately start charging for pre-booking of seats as they had started doing so about three years backed and were stopped by the Directorate General of Civil Aviation (DGCA) in early 2012. They had then petitioned the DGCA to be allowed to resume charges for this facility. After keeping the global example in mind, the regulator is learnt to have permitted this charge.
 "Our application for resuming pre-booking seat charges was lying with aviation authorities for years. When AirAsia's application for starting an airline here was cleared, we knew the move will get a push as foreign LCCs are famous for unbundling services and charging extra for everything. AirAsia on its international flights does not allow any free check-in baggage. Now the global LCC model will truly come to India," said an airline official, emphasizing that all carriers need to boost their ancillary revenues to keep base fares competitive.
 An aviation ministry statement said unbundling services and charging for them extra "has become a necessary aspect of exercising more control over operational costs and running a successful airline."
 The ministry has asked airlines to have fixed charge for services and not change them like airfares for different flights. The DGCA shall monitor the charges. Airlines will have to file details of services to be unbundled and their charges to the DGCA.
http://timesofindia.indiatimes.com/business/india-business/Air-travel-to-cost-more-as-airlines-freed-to-charge-extra-for-services/articleshow/19793961.cms
 

Jet's borrowing cost Etihad extends soft loan worth $300 million to Jet Airways to reduce

MUMBAI: Cash-rich Middle-Eastern airline Etihad has extended a low-interest loan of $300 million to Jet Airways, a sweetener that will help the debt-laden domestic carrier reduce its borrowing costs.The loan has been offered at a jaw-dropping rate of 3%, and could lead to sizeable savings for Jet, a company official said. "We'll save about $30 million annually on interest alone," the official added. The airline now pays an average annual rate of 14%. Jet will use the money to partially replace its high-cost loans. The airline had a debt of $2.1 billion at the end of December 2012 and is paying an annual interest of about 1,000 crore.
 Meanwhile, the company announced the details of its preferential allotment plan to Etihad to the stock exchanges, and said Etihad will be allotted three seats on Jet's board. Tailwinds, the Isle of Man company promoted by Naresh Goyal, has also transferred its holding in Jet AirwaysBSE 1.79 % to Goyal, paving the way for the airline to increase its public shareholding by 5% in line with the country's capital market regulations. A Jet official said road shows are going on and the offer for sale will be completed by the end of the month. Indian aviation regulations do not permit foreign equity to be more than 49%. Goyal is an NRI and his personal holding is not considered as foreign equity.
 "The deal comes as a big boost for Jet Airways. It is not just about equity infusion but also network expansion and top-line growth. It will help lighten Jet's debt burden of around 12,000 crore and its large current liabilities," says Amber Dubey, partner and head of aviation at global consultancy KPMG.
 The $300-million loan will be in addition to the $600 million the Abu Dhabi-based airline has forked out for the 24% stake, the Heathrow slots owned by Jet, and the purchase of the airline's frequent flier programme. Etihad will be facilitating this loan through their bankers, and we'll securitise our accruals to repay the five-year loan, a Jet official said.
 "The loan is likely to be extended through Etihad's bankers," a source with direct knowledge of the deal told ET. The name of the bank was not immediately available as the deal is still to be put in place.
 Debt along with the purchase of an equity stake is not unusual in international aviation deals. Etihad had lent $263 million to Air Berlin when it bought a stake in the German carrier sometime back.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/etihad-extends-soft-loan-worth-300-million-to-jet-airways-to-reduce-jets-borrowing-cost/articleshow/19789769.cms

Global airline sector profit likely to reach $7.5 bn in 2013’

Global airline sector profit is likely to grow to $7.5 billion this year, with Asia Pacific and West Asia based airlines dominating the international passenger market and leading the way in terms of improved operating margins, according to IATA data.
 This is compared to $4.6 billion worth of profit recorded in 2009, the International Air Transport Association (IATA) report said.
 “The world passenger growth in air traffic is recorded at 5 per cent per annum (CAGR) by ICAO scheduled traffic analysis since 1980,” said Sunil Malhotra, Director, Aviation Sector MENA, Ernst & Young who spoke on Global Aviation trends, quoting IATA figures.
 According to IATA, global airline sector profit will grow from $4.6 billion in 2009 to a forecast figure of $7.5 billion for 2013 with Asia Pacific and West Asia based airlines dominating the international passenger market and leading the way in terms of improved operating margins, he said.
 Malhotra will present the latest industry findings and a 10-year outlook with a session entitled ‘Looking to the skies: global aviation trends 2013-2033’ at the Arabian Travel Market (ATM) exhibition here next month.“According to the report, Asia-Pacific will lead world traffic by 2031, with a 32 per cent share, while the Middle East will rise to 11 per cent in 2031 from the current figure of 7 per cent.
 “The future forecasts over the next 20 years for the world GDP growth as per IMF is at 3.2 per cent per annum (CAGR) and based on ICAO forecasts, the number of airline passengers is projected to grow at 4 per cent per annum (CAGR) with airline traffic growth outlined to grow at 5 per cent per annum (CAGR),” Malhotra said.Kicking off the debate, two of the giants of aviation will take part in The Big Conversation on the first day of the show, with Emirates Airlines President, Tim Clark, and Qantas CEO, Alan Joyce, discussing their groundbreaking partnership.
 “The last three years have seen the global aviation industry turn a corner despite ongoing market turbulence.
 “While consolidation is the strategy in North America, and European carriers are busy lobbying for an end to excessive taxation and passenger duties, the Middle East and Asia are capitalising on both route network growth opportunities and strong passenger demand,” said Mark Walsh, Portfolio Director, Reed Travel Exhibitions.
 Partnership activity is a major focus of the report as Airlines are proactively seeking for more meaningful alliances and partnerships to boost their synergies and passenger flows.
 According to Malhotra, some Gulf carriers are joining global alliances, whilst others have entered into strategic code shares to promote traffic flows between continents.
http://www.thehindubusinessline.com/industry-and-economy/logistics/global-airline-sector-profit-likely-to-reach-75-bn-in-2013/article4666323.ece
 

Airlines to soon charge for check-in bag, preferred seat

Domestic air fare will now depend on the service you want. While checking-in a bag or getting that preferred seat will cost more, you need to pay just the base price for no-frills travel be it on a full service or a low-cost airline. The Ministry of Civil Aviation today allowed five domestic airlines — Air India, Jet Airways, IndiGo, SpiceJet and Go Air — to charge for facilities they provide flyers. That is, passengers will need to pay for check-in baggage, in-flight meal/snacks/soft drinks, carrying sports gear/musical instruments, or using the airline lounge. The only exception is water, which will be made available free of charge, as is the practice now. But the latest move could also see the cost of travel come down for some. For example a passenger booking well in advance and travelling without any frills on a low-cost airline will be able to travel inexpensively. Called “unbundled services”, the charges for these will be in addition to the base cost of the ticket. However, it is not yet clear whether passengers on full-service airlines such as Air India and Jet Airways will have to pay more for a meal as this is included in the price of the ticket now.  Currently, no airline charges for checking in a bag. Also, Jet Airways and Air India do not charge for blocking a seatHowever, a passenger in IndiGo Plus can block a seat along with meal by paying Rs 650.
The riders
The Civil Aviation Ministry has said that passengers should be given the opportunity to choose the services they want and pay only for them. And, the charges will be fixed irrespective of the base price of the air ticket, and the airlines need to announce them well in advance. The airlines will have to show the cost of unbundled services on their Web sites and online travel portals. The latest move, in a way, seeks to legalise what is being done surreptitiously by some of the airlines even while opening a new source for revenue for airlines like Air India and Jet. This practice has been in vogue in the US and elsewhere for some years, with airlines, low-cost or full-service, charging for checking in a bag.
“We looked at practices of various airlines, including Ryan Air, before coming up with the latest rules. The new rules will help airlines face up to competition from AirAsia,” Civil Aviation Minister Ajit Singh told newspersons. Air Asia and many global low-cost airlines derive a chunk of their revenue from charging for such services. The new rules will come into effect after the Directorate-General of Civil Aviation issues a Civil Aviation Requirement. “The DGCA should be able to notify the new rules in about a week. The DGCA will not regulate what airlines charge for these services,” a senior DGCA official said.
 Terming the move as a “reforms measure”, Amber Dubey, Partner and Head Aviation at KPMG, said the latest move will open a new revenue stream for the airline industry and allow flyers who do not want to use these services to fly at a comparatively cheaper fare.
http://www.thehindubusinessline.com/industry-and-economy/logistics/airlines-to-soon-charge-for-checkin-bag-preferred-seat/article4667327.ece
 

Flying to get costlier as airlines set to charge for preferred seats, check-in bags

NEW DELHI: In a move that would raise the cost of air travel, the government on Monday said it has allowed airlines to charge passengers for preferred seats on a flight, check-in baggages and meals, among other things. "Civil aviation minister Ajit Singh has decided to permit scheduled airlines to unbundle certain services and to charge fees for these services separately," an official release said. The services for which the airlines would be free to charge passengers include preferential seating, meals, snacks, drinks (barring drinking water), check-in baggages, use of airline lounges, carriage of sports equipment and musical instruments and valuable baggages which have higher carrier liability. The practice was launched in 2008 by some US carriers which were facing financial crunch. Their decision to charge for even the first checked baggage had then received flak from air travellers, but the practice still continues with the airlines generating revenue worth millions of dollars. The release said the minister's decision was based on recommendations of an independent consultant, which said, "Unbundling of services ... has become a necessary aspect of exercising more control over operational costs and running a successful airline".  "The objective of the decision is to facilitate airlines to offer low base fare for price sensitive travellers, while at the same time offer choice to service seekers at a price," it said. The decision would "allow the passengers to benefit from lower base fares and to customise the product to better suit their requirements and budget while allowing airlines to develop more sustainable operations in an environment of wafer-thin margins," the release said.
http://timesofindia.indiatimes.com/business/india-business/Flying-to-get-costlier-as-airlines-set-to-charge-for-preferred-seats-check-in-bags/articleshow/19784119.cms