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Friday, July 28, 2017

Airlines lobby against additional rights to UAE carriers

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New Delhi: Local Indian airlines under lobby group Federation of Indian Airlines (FIA) have opposed grant of any additional rights to Middle Eastern carriers into India.

“We have learnt from the travel trade in Dubai that Emirates & flydubai plan to operate additional flights to Kerala in the months of August and September 2017, ostensibly to cater to peak season traffic,” FIA wrote to the aviation ministry, in a letter dated 20 July that was reviewed by Mint.

“The UAE carriers should not be allowed to operate additional flights in excess of their capacity entitlements as the existing capacity entitlements adequately cater to the traffic demand between lndia and Dubai. Furthermore, the carriers of both sides are already utilizing the entitlements fully, deploying in excess of 130,000 seats per week in each direction between lndia and Dubai.”

FIA is led by InterGlobe Aviation Pvt Ltd-run IndiGo, SpiceJet Ltd, Jet Airways (India) Ltd and GoAir that control about 75% of the domestic market.

The carriers of Dubai currently have a large number of aircraft lying idle, due to the downturn in the economies of the Middle East coupled with the withdrawal of multiple daily flights between Dubai and Qatar, as a result of which they want to tap our peak traffic in August-September, vitiating the level-playing field between the carriers of both sides, the FIA letter said.

The local airlines feel the revenues and profits earned by them in the peak season will impact not only the profitability but also sustainability of their operations on the Kerala-Dubai routes.

“It is our urgent submission to your kind offices that any request from the UAE carriers to operate additional flights to and from Kerala should not be acceded to and the level playing field be maintained,” FIA said.

Emails seeking comment from Emirates and flydubai were awaited at the time of filing the report.

Local airlines have also told the aviation ministry separately, said an airline official who did not wished to be named, that bilaterals should only be given on mutually acceptable terms.

Indian airlines do not get the slots they want at Dubai airport and they want the ministry to resolve that issue first.

Ministerial panel holds first meet on way ahead for Air India privatization

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New Delhi: A group of ministers tasked with the privatization of Air India Ltd held its first meeting in the capital on Friday to discuss the next steps in the process.

The 45-minute meeting at the finance ministry was led by finance minister Arun Jaitley, and attended by aviation minister Ashok Gajapathi Raju, railways minister Suresh Prabhu, power minister Piyush Goyal and Air India chairman Ashwani Lohani.

One official briefed on the subject who declined to be named said the first meeting was meant to focus on two points. One, Air India was to put its accounts and data before the group to explain issues such as its debt burden and the way forward on resolving it. Two, the ministers had to discuss the appointment of a transaction adviser, legal adviser and valuer.

“The plan was to lay before them the state of the airline and not to propose something,” said the official cited above.

Only after the advisers are appointed can discussions begin on the structure of the divestment process.

The meeting was called by the department of investment and public asset management, which will now take the process of appointing consultants forward.

There was no official statement after the meeting. “If there is something worth saying, we will let you know,” Raju told reporters after the meeting.

Civil aviation secretary R.N. Choubey declined to comment. “It is market-sensitive information,” he said.

Prabhu and Lohani too declined to comment.

The panel has been mandated to look at hiving off certain Air India assets, a possible demerger of its business verticals, strategic disinvestment of three profit-making subsidiaries, the size of the proposed divestment, and criteria for eligible bidders.

The mandate was approved by the cabinet committee on economic affairs at its meeting held on 28 June.

This came a month after Jaitley told Doordarshan in an interview broadcast on 27 May that there was now a historic second chance to divest a stake in Air India 18 years after a similar move did not fructify.

Air India has about 17% share of traffic on routes linking India to international destinations and 13% of the domestic market. Its total debt was Rs48,876.81 crore as on 31 March 2017.

IndiGo (InterGlobe Aviation Pvt. Ltd), the largest airline in the country, has publicly shown interest in Air India.

The Tata group, which started the airline in 1932 before it was nationalized, has also sought details from the government in informal conversations, Mint reported on 20 July.

Jet Airways to lease out smaller aircraft to regional carrier TruJet

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New Delhi:Jet Airways may sub-lease its fleet of ATR planes to regional carrier TruJet and the deal, which is taking its final shape, could be announced in two months, reported Business Standard. Jet has 15 ATR 72-500s and three ATR 72-600s, which are leased from foreign lessors and the deal may see the company leasing out the planes in a phased manner, starting with six planes in the first phase, added the report.

The report cited an unknown source, who confirmed that the deal may see Jet leasing out six planes in the first phase.

The move may help the company earn some cash at a time when the carrier is looking for funds for its fleet induction and expansion plans, it added. TruJet is a regional airline from Hyderabad, Andhra Pradesh.

ATRs are not fitting in with Jet’s Premium Push, as it wants to go big on international flights and hence will start by subleasing the smaller aircraft, said a report in MoneyControl.com.

The move will be beneficial for both the companies, as TruJet plans to focus on regional connectivityunder the Ude Desh Ka Aam Nagrik (UDAN) scheme, added the report.

On Tuesday, Jet Airways announced 96 new flights on the domestic network during the monsoon season, including 14 new direct, non-stop flights to small towns under the regional connectivity scheme. This augmentation of domestic services between these cities comes on the back of rising demand for aviation services between these fast-growing cities, reflecting their economic progress.

IndiGo to dilute promoters’ stake to comply with regulatory norms

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New Delhi: InterGlobe Aviation Pvt. Ltd-run IndiGo will dilute its promoter stake to comply with regulatory requirements, the firm said on Wednesday.

The IndiGo board will meet on 31 July to “consider the means of achieving the minimum public shareholding in the Company in accordance with the applicable laws including through a follow on public offer and/or an institutional placement programme which may comprise of a fresh issue and/or an offer for sale and recommend the same for the approval of shareholders of the Company, if required.”

The airline, which controls 40% of the domestic market, got listed on the Bombay Stock Exchange in late 2015.

It had three years to reduce the public shareholding to 75% from current 85% under regulatory guidelines, said an analyst, who did not wish to be named. “We expected it to be sometime next year but they have clearly advanced this,” he said.

The airline sits on free cash of Rs4,500 crore currently. The analyst said he estimates this sale could yield another Rs5,000-6,000 crore or more.

IndiGo surprised investors this year by announcing plans to go regional from November and said it was interested in bidding for Air India Ltd to launch low-cost international operations. IndiGo has 136 planes in its fleet with about 450 planes on order.

IndiGo shares were up 0.36% at Rs1,280.20 apiece at 9.16am, while the Sensex was up 0.34% at 31,818.45 points.

Air India eyes bumper employee buyout ahead of privatisation

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New Delhi: Air India Ltd is drawing up a proposal to offer voluntary buyouts to just over a third of its 40,000 employees, a senior company official said, one of the largest such offers in India’s state sector, as the carrier slashes costs ahead of privatisation.

The official, who could not be named as the plans are not public, said the state-owned airline had also put fleet expansion on hold, scrapping a proposal to lease eight Boeing 787 wide-body aircraft. Air India’s board approved the proposal in April but nothing further had been done.

Air India is on the block after Prime Minister Narendra Modi’s cabinet last month approved plans to privatise the loss-making airline—selling part or all of the company and ending decades of state support.

Founded in the 1930s and known to generations of Indians for its Maharajah mascot, Air India has a complex fleet, too many staff relative to its peers and $8.5 billion in debt. Since 2012, New Delhi has injected $3.6 billion to keep it afloat.

An official in Modi’s office said the leader, under pressure to cut spending and boost basic infrastructure like ports and roads, is in “no mood” to provide fresh monetary assistance to any loss-making public sector company.

The official said that top bureaucrats in the civil aviation ministry and at Air India had been asked to present a report on how a voluntary retirement scheme (VRS) could be offered to about 15,000 of Air India’s 40,000 staffers, including contractors. “Nothing has been finalised but our aim is to make the strategic sale as simple as we can,” said a second top official in New Delhi, involved in the airline’s daily operations, adding that any fresh investments would be put on hold.

Previous attempts to offload the airline have failed mainly because of the scale and complexity of problems at Air India, as well as its influential unions.

If Modi can pull the privatisation off, it will buttress his credentials as a reformer brave enough to wade into some of the country’s most intractable problems.

United front

In its heyday, Air India boasted of a talent pool that newly founded airlines dipped into.

The government will, however, need to convince seven trade unions to accept the privatisation plan to make the company attractive to potential buyers, including buyouts and other efforts to slash costs. Their initial response was not positive.

“The government will propose a VRS scheme and we will throw their proposal in the dustbin,” said J.B. Kadian, leader of a union that represents 8,000 non-technical staff of Air India.

Kadian said a joint forum of unions representing Air India employees will launch “an agitation” in August if the government pursues its plans to privatise the national carrier.

A committee of five senior federal ministers, led by finance minister Arun Jaitley, is expected to meet this month and begin ironing out the finer details of the privatisation plan.

In the meantime, civil aviation minister Ashok Gajapathi Raju said he wants Air India to begin cutting at all levels.

Earlier this month, the airline decided to stop serving non-vegetarian meals in the economy class on domestic flights, in a bid to save up to Rs100 million ($1.6 million) over 10 months.

The action provoked uproar on social media and was belittled by aviation experts, who argue Air India management needs a massive structural overhaul, tackling thornier issues like fleet and staff, not meals.

The airline is also working to reduce the time its planes are not flying and launching direct flights to new international destinations. In July, Air India started a direct flight to Washington. It will start flying to Stockholm, Copenhagen and Los Angeles later this year.

“Keeping planes in the hangar makes no sense when Air India is trying find new sources of income. We should optimize the use of all possible resources,” Raju said. “The idea is to present a robust company to potential buyers,” the minister said

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