Category: Aviation

Tata Group unlikely to bid for Air India as terms too onerous

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s steel-to-autos conglomerate Tata Group, widely seen as a potential suitor for Air India, is unlikely to consider a bid for the state-run carrier as the government’s terms are just too onerous, two sources familiar with the matter said.

India, keen to sell the loss-making, debt-ridden airline, finalised plans in late March to divest a 76 percent stake and offload about $5.1 billion of its debt.

But the government has stipulated the winning bidder cannot merge the airline with existing businesses as long as the government holds a stake. The winner may also be required to list Air India and would need to abide by conditions designed to safeguard employee interests, restricting its ability to cut staff.

Since the terms were disclosed, no company has come forward to say it is interested or to reaffirm previous interest, while Jet Airways and rival IndiGo, have already publicly opted out of the race.

Tata Group, which already owns stakes in two airline joint-ventures in India, does not see “how a deal would be workable” under the current terms, said one of the sources, who asked not to be identified due to the sensitivity of the matter.

The same source also said the airline had too much debt and noted there was little clarity on what a buyer would be allowed to do with the airline’s large workforce.

“Anyone who puts money upfront … even for Tata to put in that kind of money, it would want complete control,” added the second source.

Tata Sons, the holding company for the conglomerate Tata Group, declined to comment.

Prior to the disclosure of the terms, there had been some expression of interest from the group.

In January, Leslie Thng, the chief executive of Vistara, a joint-venture between Tata and Singapore Airlines told reporters its owners were open to evaluating a bid for Air India. Vistara declined to comment and Singapore Airlines had no immediate comment on Wednesday.

Last October, Tata Group Chairman N. Chandrasekaran, said in a TV interview the group would “definitely look” at Air India once the privatisation process was finalised.

Emirates has ruled out Air India’s bid in a response to CNBC-TV18’s query, Ashpreet Sethi has more details.

Emirates have no plans to buy or acquire any airline. They continue to focus on organic growth as well and they will partner with any other airlines where it benefits their customers and makes commercial sense as well.

Within one week, one airline after the other has been going ahead and saying, “we will not bid for Air India.”

(With inputs from Reuters)

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Air India employees protest against airline’s privatisation

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A group of Air India employees on Tuesday held a lunch-hour meeting at the airline’s Kalina office, Mumbai, to protest against the sale of the carrier to private players.

During the half-an-hour protest meet, the union, Joint forum for Air India unions-guild-associations against privatisation, functionaries made the staffers aware of the “perils” of privatisation and its consequential impact on the employees jobs, one of the member of the forum said.

This was the first action by the Air India forum against government’s privatsation move following the civil aviation ministry seeking expression of interest (EoI) from potential bidders for a 76% stake sale in the loss-making carrier as well as divestment of two of its subsidiaries.

“Nine trade unions participated in our protest meeting during the lunch hour. The privatisation is in no way going to safeguard the employees interest. And for this reason we are totally opposed to it,” the member said.

“With such meetings, the various unions are trying to create an awareness among the employees about the impending job losses,” he added.

Air Corporation Employees Union, All India Service Engineers’ Association, Air India Employees Union, Aviation Industry Employee Guild, Air India Aircraft Engineers’ Association, All India Aircraft Engineers’ Association, Air India Engineers Association and United Air India Officers Association and Aviation Industry Employees Guild are the part of the forum.

Together, these unions represent over than 10,000 Air India employees.

The civil aviation ministry has sought EoIs from potential bidders for a 76% stake sale in loss-making Air India as well as divestment of Air India Express and AI-SATS.

On March 28, the ministry came out with the preliminary information memorandum on Air India’s strategic disinvestment.

As per the memorandum, the government plans to offload 76% equity share capital of the national carrier as well as transfer the management control.

The proposed transaction would involve Air India, its low-cost arm Air India Express and Air India SATS Airport Services Pvt Ltd, which is an equal joint venture between the national airline and Singapore-based SATS Ltd.

Eight of these unions had earlier also in a letter to Prime Minister Narendra Modi flagged the possibility of retrenchment of workforce in case of privatisation, citing job losses in the aftermath of the the previous NDA government’s decision to sell two Centaur Hotels properties in Mumbai.

“The private lobby is talking about Rs 30,000 crore bailout package to Air India for over 10-year period as a waste of tax payers money and has sought its privatisation.

But the same people are keeping quite on the default of over Rs 8 lakh crore of government-owned banks by the private corporate/companies only,” the member alleged.

The debt-ridden national carrier is staying afloat on little over Rs 30,000 crore bailout package extended by the previous UPA regime.

“Moreover, the government is selling the airline at a time when its making operating profit and is on the way to financial and operational improvement. That way, is it not trying to socialise the losses and privatise the profit? ” the member asked.

Air India has been “consistently improving” its overall performance and more than doubled its operating profit to Rs 298.03 crore in 2016-17 financial year, junior minister for civil aviation Jayant Sinha had informed Parliament earlier this year.

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Simplify deal structure to attract bidders for Air India, says KPMG’s Amber Dubey

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government’s high-profile plan to privatise Air India has run into rough weather with three airlines that were initially billed as interested parties declaring that they were not interested.  The decisions of IndiGo, SpiceJet and Jet Airways mean that the privatisation is in jeopardy. Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG, says the bid conditions are to blame for the poor interest from potential bidders. Dubey, who has advised the aviation ministry on several projects, suggests the way forward to revive the privatisation effort in an interview to Sanjeeban Sarkar.

Now that IndiGo, SpiceJet and Jet Airways have said they are not interested in buying assets of Air India, what do you think is the way forward for the sale? 

The Air India privatisation is a great move by the Modi government. It was long overdue. It is unfortunate to see India’s Big 3 airlines drop out at the expressions of interest stage itself. Serious corrections are required in the deal structure to make it work. The government has the option to have a round table with their customers – the leading Indian airlines, take their feedback, modify the bid conditions and make it reasonable.  The government also has the ‘do nothing’ option of just going ahead regardless of the outcome.

Your tweet suggested that the bid conditions are to blame for these airlines to drop out. What do you think are the most vital flaws in the conditions?

The huge Rs 33,000 crore debt, government stake of 24%, full transfer of Air India staff, operating Air India at an arm’s length, a mandatory IPO, freezing the bidder’s shareholding structure at the EoI stage without any due diligence are some of the key challenges in the proposed deal structure.  These are man-made problems and hence solvable.

There’s some talk that DIPAM (Department of Investment and public Asset Management, the government department that oversees sale of government assets) may have to go to the Cabinet for major changes.  Well, going back to the Cabinet is not like going to planet Mars. Let us do it.

Airline deals do take years to consummate, especially legacy airlines of the size and complexity of Air India.

Simplifying the deal structure to attract at least 3-4 serious bidders is in the government’s own interest.

Let me put it this way: does buying Air India make sense for a bidder?

Yes, it has huge untapped assets in terms of fleet, slots, market share, network, qualified staff etc.  These can be leveraged better when combined with a strong airline.  But the bidders don’t want to jump in to rescue Air India and die in the process.  The government needs to offer a clean deal with no debt, no forcible transfer of employees and no operational interference.  The premium received in the bids would be far higher.  The new owner and Air India will make a formidable hub carrier that India always lacked. India’s failure as a natural aviation hub was lapped up immediately by smart carriers in the Gulf and Asean.

Do you see any bidder emerging now?

After the exit of IndiGo, Jet and SpiceJet, things look bleak.  Bidders may be wary of the question – ‘If it’s so good, why is everyone running away?’  The government should talk to their customers – the airlines – and work a way out.  Ultimately, only one bidder will win, but a better competition means the government and the real owners of Air India – the silent Indian taxpayer – will earn more.

What about the Tata-Singapore Airlines combine?

There’s no official word from them.  I am not allowed to speculate.

Let’s be brutally honest: do you see the Air India sale happening?

To be brutally honest, the successful privatisation of Air India is a necessity and not a choice.  It will free up almost Rs 5,000 crore of taxpayer money annually, which can be better spent in building schools and hospitals in our villages than in providing life support to a sick PSU.

The government has to make the deal work.  Let’s hope wisdom prevails and bid conditions are simplified to attract more competition.

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SpiceJet too small to bid for Air India, says Ajay Singh

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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SpiceJet CMD Ajay Singh said the airliner is too small to bid for Air india, when asked if the company would be bidding for the debt-ridden national carrier.

“Air India is a wonderful asset but it’s large for SpiceJet,” he said.

SpiceJet flies to seven countries and about 25 percent of its capacity was on international flights, he said talking about business.

“As the new planes comes in and they give us higher range than the existing planes, there will be many more flights to international destinations. We would announcing those shortly,” he added.

He further said that we do plan to add significant number of Boeing aircraft, the Max aircraft.

The company has ordered about 175 of those planes and 25 Bombardier Q400 aircraft, he added.

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Necessary ecosystem led to 20% growth in civil aviation sector

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government has put the “necessary ecosystem” in place in terms of the infrastructure, licencing and regulatory regime, which has enabled the civil aviation sector to grow at 20%, a senior official said on Monday.

At a session on “Soaring Heights for Indian Aviation” organised by CII during its Annual Session 2018 here, Civil Aviation Secretary R N Choubey said that the Central government is taking necessary steps to address the airport capacity requirements to handle increasing volume of air traffic.

He said that the Airport Authority of India (AAI) is coming up with a long-term road map for augmenting airport capacity all over the country.

“Under the Nabh Nirman scheme funding is being explored for greenfield and brown field projects. The government is also in dialogue with the state governments for partnering and making available land available for the new airports,” Choubey was quoted as saying in a CII statement.

According to Choubey, in addition to existing 75 airports, 50 more airports will be added under UDAN scheme.

Citing the successful ‘City Pair Prorgam’ (CPP) model of the US, he urged private players to revisit their own commercial model on the same lines.

On the issue of high Aviation Turbine Fuel (ATF) prices, he informed that to give fillip to the aviation sector, the state governments are willing to “bite the bullet in their finances”.

“States like Telangana and Andhra Pradesh have announced the reduction in value-added tax (VAT) on ATF from 16 per cent to one per cent. Many other state governments such as Delhi, West Bengal and Maharashtra who are in an effort to boost regional connectivity have rationalised the surcharges for regional flights,” he said, as per the statement.

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Why India needs more airports – urgently!

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government’s announcement that it will expedite the construction of a greenfield airport at Jewar, near Noida, couldn’t have come at a better time.

As India’s airport infrastructure creaks under the weight of increasing footfalls and squeezed capacities at the airside as well as inside terminal buildings, a steadfast airport capacity buildup is the need of the hour.

Mumbai is already bursting at the seams and the airport at Delhi is already saturated. Building an alternate to the existing airport at Delhi makes eminent sense, though this should have happened much earlier.

London has five major airports, New York has three. Delhi may get a second airport only in some years.

Remember, three out of four flyers in India use one of the 10 busiest airports. The six busiest airports handled over 175 million passengers in 2016-17, which means even among the top 10 airports, these six saw two in three air passengers.

Creaking Airport Infrastructure

At least four airports – at Delhi, Mumbai, Bengaluru and Hyderabad – are already handling passengers in excess of their maximum indicative handling capacity.

India’s air traffic growth still comes from its large metros, with the top 10 airports lying across Delhi, Mumbai, Bangalore, Chennai, Kolkata and so on. This means though there are airports/airstrips aplenty in smaller towns and cities, these do not witness enough footfalls.

The feverish growth in domestic aviation in the country over the last several years has brought into focus the woeful lack of aviation infrastructure across the busiest cities, with little relief in sight. India’s top 10 airports handled nearly double the amount of traffic in calendar 2018 at 232 million compared with just 124 million in 2013.

So airport queues are getting longer, flight movement and on-time performance of airlines is getting worse and generally, India’s domestic flyers are spending more time than ever before in reaching their destinations.

Earlier policy decisions, such as having a condition of 150-km distance between existing and new airports etc have already stymied the growth of airport infrastructure. Unlike the other growing markets, we still do not operate multiple airports around our big cities.

Sample this: one Indian airline reported only 34% flights on time from Mumbai airport this February. That means two out of every three flights of this airline were delayed. In fact, Mumbai’s story epitomizes the severe infrastructure squeeze across our busy airports.

Earlier, flights managed to arrive/depart from Mumbai at about 50% on-time statistic, but the latest DGCA data show the best performance out of this choked airport was 48.9% in February.

This means, at least every second flight landing or departing from Mumbai was delayed, whichever airline you chose to fly. The current Mumbai airport has been strained beyond capacity and plans to build a new one at Navi Mumbai have been horribly delayed.

According to analysts at Kotak Institutional Equities, airports at Hyderabad and Goa (which come in the list of the top 10 airports) have already reached one-and-a-half times their capacity. The one at Mumbai is operating at 121% of its capacity while the country’s busiest airport – at Delhi — has also reached saturation with 101% capacity utilization in 2016-17.

As the government has said in its reply in Lok Sabha, Delhi had the maximum daily aircraft movement at 1143 last fiscal, followed by Mumbai at 870 and Bengaluru at 488.

Where Will Airlines Park Their Planes?

Choked airports may worry flyers, but India’s airlines continue to order aircraft at alarming rates in anticipation of continued traffic growth.

IndiGo, Jet Airways, SpiceJet and GoAir have together placed orders for 835 aircraft, with deliveries staggered till FY2025. This, on an existing base of 558 aircraft.

This rapid fleet addition will require greater aircraft handling capacity at airports, the Kotak analysts say.

“Capacity at some of top ten airports by number of passengers handled has already been exhausted; most of these airports are undergoing capacity expansion which would come through only in the next 2-4 years leading to limited passenger growth at some of these airports.”

The Delhi airport is expected to handle 85 million passengers by 2022 against 64 million now and capacity expansion of Terminals I and III has been envisaged by 2020.

Mumbai, two phases of the yet-to-be-operational Navi Mumbai airport should start functioning by 2022.

By then, Mumbai would need to handle 65 million passengers each year against 40 million now.

Kolkata should see doubling of capacity by 2021. Bangalore, Chennai, Hyderabad, Goa airports should also see some amount of capacity addition.

But these planned capacity enhancements may not prove adequate given our double digit traffic growth projections.

The government is doing its bit by operationalising ghost airports under the regional connectivity scheme UDAN and also planning to upgrade some existing ones but is looking for a major share of the investments to come from the private sector.

Sindhu Bhattacharya is a journalist based in Delhi.

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A third of flights cancelled as Air France strike gathers steam

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Some 30% of Air France flights have been cancelled as strikes over pay rises appear to be intensifying.

Saturday’s one-day walkout is affecting international and domestic travel, notably a quarter of flights at Paris’ Charles de Gaulle and Orly airports. Air France is urging passengers to check the status of their flights and offering to change tickets for free.

It’s the fifth Air France strike since February, and the number of cancelled flights is rising. Unions this week announced more strikes this month to coincide with national rail walkouts.

Air France unions want 6% pay raises after years of salary freezes. Air France is offering 1% raises, saying anything higher will hurt its turnaround efforts.

The strikes cost Air France millions of euros a day..

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India opens $15 billion contest for more than 110 fighter jets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India is looking to buy around 110 fighter jets, the air force said in a request for information issued on Friday, marking the first step toward a long-delayed deal that could be worth more than $15 billion.

Boeing, Lockheed Martin, Saab and Dassault Aviation are among the manufacturers expected to compete.

The aircraft must be built largely in India as part of Prime Minister Narendra Modi’s drive to build a domestic industrial base.

The air force said in a notice that “85 percent will have to be made in India by a Strategic Partner/Indian Production Agency”.

Lockheed has offered to move its F-16 production line in Fort Worth, Texas, to India and make it the only plant worldwide to produce the F-16 for not only India but also other countries, said Vivek Lall, vice president, strategy and business development at Lockheed Martin.

Lockheed has teamed with India‘s Tata Advanced Systems to build the planes locally while Sweden’s Saab has entered into a partnership with the Adani Group, a resources conglomerate. The other contenders have not announced their local partners.

The tender will be open for makers of both single engine and twin-engined combat jets, in a widening of the field. The Eurofighter Typhoon and Russian aircraft are also potential contenders under the new requirements.

A spokesman for Dassault Aviation which makes the twin-engine Rafale declined to comment.

Earlier, the defence ministry had sought expressions of interest from single-engine manufacturers which effectively restricted the contest to Lockheed’s F-16 and Saab’s Gripen fighter jets.

But in February the government asked the air force to open up the competition to twin-engined aircraft, in the latest flip-flop in policy that has delayed the acquisition process for years and left the air force short of hundreds of planes.

India began its search for new planes for the Indian air force in 2003 to replace its Soviet-era MiG fighters.

The request for information is open until July, the air force said. A request for proposal will then be issued followed by bid evaluations and contract negotiations. The process could take years, officials say.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IndiGo not to bid for Air India under ‘current divestiture plans’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Budget passenger carrier IndiGo on Thursday said that it will not bid for the national passenger carrier Air India under the “current divestiture plans”.

The development assumes significance as IndiGo had earlier expressed its interest in acquiring Air India’s international operations and Air India Express (AIXL). However, the central government has invited “Expression of Interest” to off-load 76% stake and management control of the airline.

On March 28, the government issued the Preliminary Information Memorandum (PIM) for the strategic divestment of AI, along with the airline’s shares in AIXL and AISATS (Air India SATS Airport Services).

“From day one, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express. However, that option is not available under the government’s current divestiture plans for Air India,” said IndiGo’s President and Whole Time Director Aditya Ghosh.

“Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations,” Ghosh said in response to queries from investors regarding IndiGo’s involvement in the upcoming divestiture of Air India.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow