Wednesday, November 18, 2015

Airlines to challenge CCI’s order

THE HINDU,18NOV2015


Stocks of Jet Airways and IndiGo came under selling pressure in the morning but the stock prices recovered during the day after investors started discounting the impact of the penalties.

Jet Airways, IndiGo and SpiceJet, the three airlinesthat have been penalised by the Competition Commission of India (CCI) on charges of colluding to fix Fuel Surcharge (FSC) on air cargo, have decided to legally challenge the order.
“The company is studying the CCI order and will take legal steps to challenge the above order in the appropriate forum.
“The company has been legally advised that it is not in contravention of the provisions of the Competition Act, 2002,” InterGlobe Aviation Ltd, which owns and operates IndiGo said.
InterGlobe Aviation Ltd has been asked to be pay penalty of Rs.63.74 crore.
Jet Airways, which has been imposed with a penalty of Rs.151.69 crore, said that the investigation was initiated against five airlines on the basis of information provided by Express Industry Council of India (EICI) alleging collusion in levy of fuel surcharge on transport of cargo.
“While the investigation carried out by the Joint Director General, CCI, concluded that the allegations levelled against the airlines were not proved, the Commission, pursuant to the objections filed by EICI, has held otherwise and imposed a penalty on the company and two other airlines,” Jet Airways said in a filing with the stock exchanges.
“Jet Airways believes that it is not in contravention of the provisions of the Competition Act and it shall pursue all available legal steps to defend its position,” the airline said.
Similarly, SpiceJet said it did not indulge in anti-competitive activities, as found in the investigation of the CCI which has imposed a penalty of Rs.42.48 crore on the Ajay Singh led airline.
“The company is examining the order and shall be taking such steps, including challenging the order in appropriate forum as may be advised and deemed necessary to defend the company’s position,” SpiceJet said.
Since these airline companies are listed on stock exchanges, the stocks of Jet Airways and IndiGo came under selling pressure in the morning but the stock prices recovered during the day after investors started discounting the impact of the penalties.
Jet Airways stock closed with a loss of 3 per cent at Rs.416, InterGlobe Aviation (IndiGo) closed with a gain of 0.90 per cent at Rs.1,044.40 and SpiceJet closed at Rs.52.55, a gain of 9.48 per cent, after touching 52 weeks high of Rs.54.40 in intraday on news that the airline would place order for 150 planes to increase its fleet size.
Interestingly, Air India was spared as its conduct was not found to be parallel with other airlines and Go Air were let off as it gave its cargo belly space to third party vendors with no control on the cargo operations.

Jet, IndiGo and SpiceJet stocks volatile

THE HINDU,18NOC2015

Shares of Jet Airways, IndiGo and SpiceJet saw high volatility on Wednesday morning after the CCI slapped on them penalties totalling Rs. 258 crore even as they said they will pursue legal steps against the order.
Clamping down on unfair business practices in the aviation sector, Competition Commission of India (CCI) had on Tuesday penalised the three airlines for cartelisation in determining the fuel surcharge on air cargo.
The three airlines said on Wednesday they would pursue legal steps against the order.
Reacting to the development shares of InterGlobe Aviation opened at Rs. 1021, and touched a 52-week high value of Rs. 1,059.20 and also saw a low of Rs. 1,015 on the BSE.
Similarly, SpiceJet touched an intra-day high of Rs. 52.65 and a low of Rs. 46.25. Jet Airways saw a high of Rs. 428 and a low of Rs. 410.25.
A penalty of Rs. 151.69 crore was imposed on Jet Airways.
On InterGlobe Aviation and SpiceJet it is Rs. 63.74 crore and Rs. 42.48 crore respectively. InterGlobe runs no-frills carrier IndiGo.
“Jet Airways believes that it is not in contravention of the provisions of the Competition Act and it shall pursue all available legal steps to defend its position,” the carrier said in a regulatory filing.
In a separate filing, InterGlobe Aviation said the company is studying the CCI order and would take legal steps to challenge it in the appropriate forum. “The company has been legally advised that it is not in contravention of the provisions of the Competition Act, 2002,” it noted.
SpiceJet also said it would take steps, including challenging the order, after examining it.

Tuesday, November 17, 2015

Air One Aviation waits for long term investor to get wings

THE HINDU,17NOV2015

Air One Aviation Private Ltd - an integrated aviation player which is into air charter business, aircraft maintenance service, aviation consultancy, ground handling, aviation academy and promoted by former Air Sahara President Alok Sharma - is waiting for long term investors to start a schedule national airline in India, the company’s top executive said.
Long term financial investors and even foreign airlines are understood to be staying away from investing in new airline ventures due to uncertainty in India’s Civil Aviation Policy.
“No one has come to us with an investment proposal though we received NOC 16 months back. An opportunity exists for a full service carrier but because there is no clarity on Indian’s Aviation Policy more specifically on the 5/20 rule (5 years of domestic flying experience and a fleet of 20 aircraft to fly abroad), investors are not willing to commit funding,” Alok Sharma, Promoter and Director, Air One Aviation told The Hindu.
The company which operates under the brand name Air One received No Objection Certificate (NOC) from the Ministry of Civil Aviation in July 2014 along with other players to start a pan India domestic airline, but it is yet to approach the Directorate General of Civil Aviation (DGCA) for a flying permit. Unless renewed, the NOC will lapse in August 2016.
Two new airlines Turbo Megha which operates under the brand name TrueJet and Air Pegasus which started operations earlier this year reported market share of 0.3 per cent and 0.2 per cent respectively for September 2015.
“Recent developments in the domestic market have made it challenging for any new player to survive without a long term and profitable business plan. Jet Airways and SpiceJet are turning around. IndiGo and Go Air are making profit while two new entrants (AirAsia India and Vistara) are vying for space. Under these circumstances, selection of the right aircraft and long term funding will make the difference,” Mr Sharma said.
“The challenge is the plane. There are not very many planes available to start a viable business. Unless I have access to big money, there is no point starting. We are exploring whether we would go for Embraer or ATR fleet. We are waiting for a set of investors to pull everything,” he added.
Air One plans to induct six to eight planes a year and in five years to have a fleet of 40 planes.
“There is space for another full service airline. But you need to select the right aircraft. The fuel efficient A320 Neos are not available for the next five years. There is opportunity in the international market, so new players are lobbying for the removal of the 5/20 rule,” Mr Sharma added
He said his company would require Rs 500 crore in five years to start and run the airline.
“We have a networth of Rs 100 crore. We can start operation with an investment of Rs 150 crore. There is an opportunity in smaller planes. We are working hard,” Mr Sharma who was earlier with Modiluft, InterGlobe and Sahara Group said.

Friday, November 13, 2015

Domestic carriers allowed to roll out zero bag fares

THE HINDU,13NOV2015

Air India allows its passengers to carry up to 23 kgs of check-in baggage free-of-cost

Aviation regulator DGCA has now allowed domestic carriers to roll out “zero bag” fares and charge penalty against check-in baggage for tickets booked under such an offer.
At present all domestic private airlines except national carrier Air India allow a flyer to carry up to 15 kgs of check-in baggage without any cost.
Air India allows its passengers to carry up to 23 kgs of check-in baggage free-of-cost.
“Airlines are allowed to offer no check-in baggage/hand baggage only fare scheme subject to the condition that the penalty to be imposed on a passenger, who avails such schemes but turns up with baggage for check-in at airline counter, cannot exceed the amount of incentive offered compared to lowest fare,” Directorate General of Civil Aviation (DGCA) said in its updated Air Transport Circular for unbundling of services.
The circular was issued early this week.
Reacting to the development, budget carrier SpiceJet, which had first rolled out such a scheme in June this year, said regulator’s move is in line with the changing trends in the industry.
“We welcome this customer and environment friendly move, which is in line with the changing trends in the industry,” SpiceJet’s head of administration and Accountable Manager, G. P. Gupta said.
In June this year, SpiceJet had rolled out a scheme, offering a discount of Rs.200 to every passenger who books a flight with only one handbag and no check-in baggage.
The offer, however, came with a rider that those who book tickets at discounted fares but later decide to carry check-in baggage would have to pay a fee of Rs.500 for up to 10 kg and Rs.750 for up to 15 kg baggage. As part of the unbundling of services, domestic airlines were allowed to charge from the customers for various facilities such as preferred seats, check-in baggage charges and use of lounges, by the regulator in April, 2015.

Thursday, November 12, 2015

Infrastructure key to attract FDI in general aviation

THE HINDU,12NOV2015

The Government’s decision to allow 100 per cent Foreign Direct Investment (FDI) in general aviation and ground handling services is likely to benefit these segments as foreign air charter operators and ground handlers with deep pockets and expertise will open up base here or buy out existing players but the policy decision must be backed by infrastructure on the ground feel experts and general aviation players.
“It is a welcome move. But this will not have any immediate impact. Policy decision must be backed by infrastructure development and a focused approach for general aviation to attract FDI. Without adequate parking and landing slots for charter planes at key airports in Mumbai and Delhi, general aviation cannot benefit,” said Rajeev Wadhwa, Chairman & CEO, Baron Luxury and Lifestyle which provides air charter services to HNIs and others under its brand Baron Eagle.
“Investors need favourable policies but investment always chases viability and strong balance sheets. So without improving airport infrastructure and developing a separate policy for general aviation, and providing seamless connectivity nothing much can be achieved. We lack in air strips and heli ports. All the investments that are expected to come in will need infrastructure that would ensure a return of 20 to 24 per cent on EBITDA level,” he said.
The general aviation sector, comprising 120 non-scheduled operators with a fleet of close to 200 jet and turbo prop aircraft in India, is suffering from heavy losses amidst high operating cost, underutilized capacity and tough regulatory environment that is considered stringent for movement of aircraft carrying HNIs, corporate honchos and foreigners.
“In India 35 per cent of general aviation aircraft capacity is underutilized. Here the maximum utilization per aircraft is 400 hours per year as compared to 800 to 900 hours internationally. Unless we improve the flying hours here, viability will remain a distant dream and no one will be keen to invest,” Mr Wadhwa said.
The Hindu tried to contact multiple air charter operators but many preferred to stay away from commenting as clarity is awaited.
They said, most of them have sold of their aircraft due to losses and helicopter charter service has also not taken off as India does not have a heli-tourism policy. Most of the helicopters are engaged in off-shore operations.
“Bringing 100 per cent FDI in non-scheduled air transport services, especially in the Helicopter sector is a welcome move. With the draft civil aviation policy providing a structural lift to the Helicopter operations in India, 100 per cent FDI will bring in capital and expertise and shift dynamics completely,” said Kapil Kaul, CEO, South Asia, Centre for Asia Pacific Aviation (CAPA).
“Both the recent changes- completely aligning policy to the needs of the sector and 100 per cent FDI- will be game changing for non- scheduled operations especially Helicopter operations in India. It is a very positive move,” he said.
Mr Kaul said that the opening up of 100 per cent FDI in ground handling services is another welcome move as it would allow existing and new ground handling firms to plan for more aggressive expansion and investment in India.
“The existing 26 per cent requirement for Indian investment in ground handling couldn’t attract serious Indian players and constrained the operational and strategic development of the sector. I can see consolidation in ground handling industry as existing International players will buy out the Indian share holders,” Mr Kaul said.
According to CAPA the provision of 49 per cent FDI under automatic route will help in easing of entry but will not have any significant impact.
“Overall, the announcements will have positive impact. It should send a positive signal about Government’s intent especially as the draft civil aviation policy has already incorporated some significant measures. Revival of investment interest in aviation is subject to implementation and execution of the measures announced,” Mr Kaul added.

Tuesday, November 10, 2015

Boeing, Tata Advanced Systems form JV

THE HINDU,10NOV2015

The JV will initially create a manufacturing center of excellence to produce aerostructures for the AH-64 Apache helicopter

Aviation major Boeing and the Hyderabad-based Tata Advanced Systems Ltd (TASL) have joined hands to manufacture aerostructures, starting with those for the AH-64 Apache helicopter, in India.
Announcing their joint venture, a release from Dubai on signing of the agreement on Monday, said the partnership was for also collaborating on integrated systems development opportunities in the country.
A manufacturing centre of excellence to produce aerostructures for the Apache helicopter is to be created first. In September, India had signed contracts with Boeing for purchase of 22 Apache and 15 Chinook helicopters, in a deal to be executed over four years and valued about $3 billion.
President and CEO of Boeing Defense, Space & Security, Chris Chadwick said capitalising on India’s industrial capability, innovation and talent, the partnership would help improve Boeing’s long-term competitiveness.
Describing the JV as a ‘clear example’ of Boeing’s long-term commitment to ‘Make in India’, Boeing India President Pratyush Kumar said over the last 12 months “we have doubled our sourcing from India and committed to continue that journey.”
Over time the JV — agreement for which was signed by TASL Chairman S. Ramadorai and Senior Vice-President (global sales and marketing) of Boeing Defense, Space & Security, Tom Bell — would compete for additional manufacturing work packages across Boeing platforms, both commercial and defence.
The agreement, according to Mr. Ramadorai, will propel growth of the Indian aerospace sector by leveraging the world-class competencies of TASL and its supplier eco-system.
It would provide access to India’s world-class manufacturing capability, skilled talent and competitive cost structures.
TASL, its CEO Sukaran Singh, said, is one of the select few in the private sector into manufacturing and assembly of aircraft and helicopters in the country and well-positioned for large-scale systems integration work in the aerospace and defence sectors.
The wholly owned subsidiary of Tata Sons, offering integrated solutions for aerospace, defence and homeland security, is a manufacturing partner for global OEMs, including Boeing, Airbus, Sikorsky, Lockheed Martin Aeronautics, Pilatus Aircraft Ltd, Cobham Mission Equipment and RUAG Aviation.
A few other Tata group companies have established partnerships with Boeing to manufacture aerostructures for Boeing’s commercial and military aircraft.

Jet Airways confirms order for 75 Boeing 737 Max aircraft

THE HINDU,10NOV2015

The deliveries will start from 2018 and transaction will be completely financed and managed through a sale and leaseback arrangement.

Jet Airways confirmed an order for the purchase of 75 Boeing 737 Max aircraft at the Dubai Airshow on Monday.
The order includes options and purchase rights for an additional 50 aircraft. This is the airline’s largest ever fleet order valued at $8.7 billion at list price.
The deliveries will start from 2018 and transaction will be completely financed and managed through a sale and leaseback arrangement, Jet Airways said.
The new aircraft will support the airline’s replacement strategy and ensure it maintains a modern, environmentally friendly fleet, the airline said. Currently, Jet Airways has a fleet of 115 aircraft.
“This order is an endorsement of our confidence in the long-term prospects of the Indian aviation sector, which reflects the positive forecast for the country’s economy, and offers tremendous potential for growth and development,” Naresh Goyal, Chairman, Jet Airways, said in a statement.
Cramer Ball, Chief Executive Officer, Jet Airways said, “This order is a reaffirmation of our commitment to continue providing a best-in-class full service travel experience to our guests. Just as importantly, these new generation aircraft are highly fuel efficient and will help drive our operational efficiency.”
Boeing Commercial Airplanes President and CEO Ray Conner said that Jet Airways would be the first airline in India to take delivery of the 737 MAX. “The 737 MAX will bring new standards for fuel efficiency and economics, and a premium passenger experience to Jet Airways,” Mr. Conner said.

Monday, November 9, 2015

Boeing, Tata Group form JV to make aerostructures

THE HINDU,09NOV2015

Collaborate on integrated systems development opportunities as well. The Joint Venture would create a manufacturing centre of excellence to produce aerostructures for the AH-64 Apache Helicopter.

Boeing and Tata Advanced Systems (TASL) have joined hands to manufacture aerostructures for aircraft and collaborate on integrated systems development opportunities in India.
Initially, the Joint Venture would create a manufacturing centre of excellence to produce aerostructures for the AH-64 Apache Helicopter. It would compete for additional manufacturing work packages across Boeing platforms, both commercial and defence, a release from Dubai said on Monday.
“Boeing and Tata Advanced Systems intend to grow the partnership in future with a focus on opportunities to collaborate on development and selling of integrated systems,” said the announcement on signing of the agreement between TASL Chairman S. Ramadorai and Senior Vice President (Global Sales and Marketing) Boeing Defense, Space & Security Tom Bell.
Boeing International President Marc Allen, Boeing India President Pratyush Kumar and Tata Advanced Systems CEO Sukaran Singh attended the ceremony.
“This partnership will capitalise on India’s industrial capability, innovation and talent to contribute to Boeing’s long-term competitiveness and position us for future growth in the global marketplace,” President and CEO of Boeing Defense, Space & Security Chris Chadwick said.
According to Mr. Ramadorai, “the agreement will propel growth of the Indian aerospace sector by leveraging the world-class competencies of the TASL and its supplier eco-system as well as provide access to India’s world-class manufacturing capability, skilled talent and competitive cost structures.”
Sourcing doubled
“Over the last 12 months, we have doubled our sourcing from India and are committed to continue that journey,” said Mr. Kumar, highlighting that the JV was a pointer of Boeing’s long-term commitment to Make in India. The TASL, said Mr. Singh, was one of the select few in the private sector in India into manufacturing and assembly of both aircraft and helicopters, well-positioned for large-scale systems integration work in the country’s aerospace and defence sectors.
A wholly owned subsidiary of Tata Sons, the TASL offers integrated solutions for aerospace, defence and homeland security. It is a manufacturing partner for global OEMs, including Boeing, Airbus Group, Sikorsky Aircraft Corporation, Lockheed Martin Aeronautics, Pilatus Aircraft Ltd, Cobham Mission Equipment, RUAG Aviation, the release said.

Boeing, Tata Group announces aerospace JV in India

THE HINDU,09NOV2015

US aviation major Boeing and Tata Advanced Systems today announced a joint venture that will manufacture aero structures for AH-64 Apache attack choppers, recently ordered by India, and collaborate on integrated systems development opportunities in India.
The joint venture will initially create a manufacturing centre of excellence to produce aero structures for the AH-64 Apache helicopter and compete for additional manufacturing work packages across Boeing platforms, both commercial and defence.
“Boeing and Tata Advanced Systems intend to grow the JV partnership in the future with a focus on opportunities to collaborate on development and selling of integrated systems,” a statement by Boeing said.
Boeing had recently received an order for 22 AH-64E Apache attack helicopters and 15 CH-47F Chinook heavy-lift helicopters. Both are the newest models of these aircraft.
“This partnership will capitalise on India’s industrial capability, innovation and talent to contribute to Boeing’s long—term competitiveness and position us for future growth in the global marketplace,” said Chris Chadwick, president and CEO of Boeing Defence, Space & Security.
Boeing India President Pratyush Kumar said that over the last 12 months, the company has doubled its sourcing from India. “We are committed to continue that journey,” he said.
Boeing and Tata group companies have established partnerships in India to manufacture aerostructures for Boeing’s commercial and military aircraft.
Tata Advanced Materials has delivered composite panels for the power and mission equipment cabinets and auxiliary power unit door fairings for the P—8I long—range maritime surveillance and anti—submarine warfare aircraft.
TAL Manufacturing Solutions is manufacturing complex floor beams out of composite materials for the Boeing 787—9. It also provides ground support equipment for the C—17 Globemaster III strategic airlifter.

Sunday, November 1, 2015

Capping regional fares, under proposed RCS scheme, will hurt airlines, says CRISIL

THE HINDU,01NOV2015

As of now, almost 50 per cent of expenses of an airline are due to fuel costs, as total tax on jet fuel is around 45 per cent. Some States levy as high as 30 per cent tax on ATF.

Regional connectivity scheme (RCS), as proposed in the draft aviation policy, is a big negative for the heavily indebted and loss-making airlines as it would cap fares on regional routes, says a report.
“We believe capping fares on regional routes, under the proposed RCS, to be effective April 2016, is a negative for airlines. Even with the 2 per cent cess on other tickets, we expect domestic air fares to decline by 5-7 per cent in FY17,” CRISIL said in a report, after the government sought comments on the new aviation policy.
The report, however, said the proposed 2 per cent levy on tickets for regional connectivity fund and freedom to charge ancillary services would marginally add to overall ticket cost and this would slightly offset the impact of price control.
It also said RCS needs more explanation as there is no clarity on whether a fare of Rs.2,500 per hour would be capped even for last-minute booking, identification of specific routes and associated regional impacts, and specific modalities to be adopted in administering this scheme.
However, linking reduction in State level tax on ATF to 1 per cent or below to avail the capped prices would help bring down the overall operational cost for airlines.
As of now, almost 50 per cent of expenses of an airline are due to fuel costs, as total tax on jet fuel is around 45 per cent. Some States levy as high as 30 per cent tax on ATF.
Welcoming the tax sops on MROs (maintenance, repair and overhaul), it said the incentives would provide a fillip to the industry.
The draft policy called for abolition of 12.36 per cent service tax, exemption from Customs duty on parts, three years of tax-free storage period of imported spare parts and easy Customs clearance for the MRO segment. Another move is according MRO, ground handling, cargo and ATF the benefits of the infrastructure sector, the report said.
Currently, 90 per cent of aircraft repair work is done overseas as getting it done domestically means paying 60 per cent more. So the measure would help save a lot of forex, according to CRISIL. Maintenance expense constitutes 10-15 per cent of the total operating cost of an airline.
Last Friday, government announced a slew of steps to boost domestic aviation in the much-awaited draft aviation policy, offering a bouquet of measures to make air travel more affordable.
The key propositions include a capped price system to up regional connectivity and service tax waiver for MROs.
But there is lack of clarity on the 5/20 rule that has been in force from 2004, making only those airlines with five years of domestic operations and a fleet of 20 airplanes eligible to fly abroad. India is the only country that has such a rule.

Thursday, October 29, 2015

Jet Airways Group turns to Q2 profit

HE HINDU,29OCT2015

Jet Airways Group reported net profit of Rs.83 crore for the second quarter ended September 30, as compared to net loss of Rs.42.8 crore in the same period last year.
This is the airline group’s second consecutive profitable quarter in the current financial year and a profitable second quarter after a gap of eight years, Jet Airways, in which Etihad Airways owns 24 per cent stake, said.
Jet Airways group comprises Jet Airways and JetLite whose merger process with the former is on.
On a standalone basis, Jet Airways reported net profit of Rs.87.59 crore in the second quarter against profit of Rs.70 crore a year earlier.
“The Indian domestic aviation market is witnessing robust growth with traffic growing by 20 per cent. Jet Airways is committed to contributing to this growth by providing enhanced connectivity and a full-service travel experience to our guests. Our financial performance in the second quarter clearly demonstrates that our efforts are showing positive results,” Naresh Goyal, Chairman, Jet Airways said in a statement.
Jet Group’s total revenue for the second quarter increased by 8.1 per cent to Rs.5,504 crore from Rs.5,092 crore in the same period last year. Passenger revenues rose by 9.5 per cent to Rs.4,682 crore from Rs.4,277 crore in the same period last year.
Jet Group’s domestic capacity grew by 16.6 per cent last quarter while passenger numbers grew 34.5 per cent which were much higher than the industry growth, the airline said.
At the same time, in the international business the airline registered a 6.6 per cent growth in capacity and a 9.7 per cent growth in passengers.
“This improvement is largely the result of optimizing the network to enable tighter integration between domestic and international networks, enhanced synergies with partner carriers and improved operational performance,” Jet Airways said.
“It is encouraging to report a profit in the second quarter, which is traditionally a lean season for the aviation sector,” Cramer Ball, Chief Executive Officer, Jet Airways said.
“While the robust competition in the Indian aviation sector continues to put pressure on yields, we have continued to make progress by focusing on improving operational efficiency,” he added.
“The growth in passengers flown and the improved aircraft utilisation have been significant contributors to the performance in the second quarter,” Mr. Ball said.

Tuesday, October 27, 2015

InterGlobe Aviation IPO hits market; issue subscribed 33%


THE HINDU,27OCT2015

The Rs. 3,018-crore initial public offer (IPO) of IndiGo’s parent InterGlobe Aviation was subscribed 33 per cent till noon on the first day of the issue.
The much-awaited IPO had received bids for 99,26,190 shares against the total issue size of 3,01,22,088 shares, data available with the NSE till 1200 hrs showed.
The portion reserved for qualified institutional buyers (QIB) was over-subscribed 1.14 times, sources said.
However, retail and high net worth individual (HNI) category saw slow demand.
InterGlobe Aviation has already raised Rs. 832 crore from anchor investors by allotting shares at the upper price band of Rs. 765 apiece.
InterGlobe hit the capital markets to raise Rs. 3,018 crore through the initial public offering, the biggest in nearly three years. The price band for the offer has been fixed at Rs. 700-765 per share.
The company had reduced its initial share sale size to a little over Rs. 3,000 crore last week, with three of the promoters deciding to sell less number of shares than proposed earlier.
The offer comprises fresh issue of shares worth Rs. 1,272.2 crore and the revised Offer for Sale (OFS) size that would be about Rs. 1,746 crore. Together, the share sale can rake in up to Rs. 3,018.2 crore.
The IPO would conclude on October 29.
Barclays Bank PLC, Kotak Mahindra Capital Company Limited and UBS Securities India are managing the issue.
IndiGo has a fleet of 98 aircrafts and about 75 of them are operating on lease — a business model which has helped it lower costs.

Tuesday, October 20, 2015

IndiGo lowers IPO size to Rs 3,018 crore

THE HINDU,20OCT2015

IndiGo’s parent InterGlobe Aviation has reduced its initial share sale size to a little over Rs 3,000 crore, with three of the promoters deciding to sell less number of shares than proposed earlier.
The operator of the profitable no-frills carrier would be hitting the capital market on October 27 and the price band for the offer has been fixed at Rs 700-765.
With three promoters — Rakesh Gangwal, Shobha Gangwal and Chinkerpoo Family Trust — deciding to offload less number of shares in the company, the IPO size has come down by Rs 250 crore to Rs 3,018 crore. On the basis of earlier proposal, the initial share sale could have fetched up to Rs 3,268 crore.
These figures are based on the upper price band of Rs 765 apiece.
InterGlobe on Tuesday said the size of Offer for Sale by the promoters has been reduced to 22.82 million as against earlier plan to offload 26.11 million.
Rakesh Gangwal would now be selling only 2.74 million shares, lower than earlier plan to offload 3.76 million.
Another promoter Shobha Gangwal would sell only 1.17 million shares, revising down from 2.23 million shares.
Further, Chinkerpoo Family Trust (Trustees are Shobha Gangwal and JP Morgan Trust Company of Delaware) has reduced the number of shares to be sold to 2.42 million from the previous plan to offload 3.64 million shares, according to a public notice.
Now, the IPO comprises fresh issue of shares worth Rs 1,272.2 crore and the revised OFS size that would be about Rs 1,746 crore. Together, the share sale can rake in up to Rs 3,018.2 crore.
InterGlobe, the holding company of IndiGo, on Monday said it would retire Rs 1,166 crore out of its Rs 3,912—crore debt from the IPO proceeds.
Recently, the company declared an interim dividend of Rs 1,500 crore to the promoters.
When asked about hefty payouts the promoters have been getting all these while, the company’s President Aditya Ghosh had said: “As a manager my mandate is to keep my customers happy, my employees happy and also investors/shareholders. I have been doing as a private company and will continue to do so as public company going forward.”
IndiGo’s IPO would close on October 29.
The much—awaited offer is also seen as a test case for revival of big—ticket sales in the primary market.

Monday, October 19, 2015

IndiGo to retire Rs 1,166cr debt from IPO proceeds

THE HINDU,19OCT2015

Set to hit the capital markets with Rs 3,268 crore IPO next week, InterGlobe Aviation on Monday said it will retire nearly one-third of its total debt of Rs 3,912 crore from the share sale proceeds.
InterGlobe Aviation is the holding company of IndiGo airline. The company said it will retire Rs 1,166 crore out of its Rs 3,912 crore debt from the IPO proceeds.
Stating that the airline has not a single penny in working capital or non-aircraft purchase related debt, company President Aditya Ghosh said the entire Rs 3,912-crore debt it has is related to aircraft purchases. Out of its nine years of existence, it has been profitable in seven years, he claimed.
“For us the company turning a negative net worth of Rs 139 crore is a non-event,” Ghosh said.
It happened on June 30, when the company declared an interim dividend of Rs 1,500 crore to the promoters. Since then the net worth has turned positive and it remains so. As of now “we have a cash balance of over Rs 3,500 crore on our books”, he said.
“We had to report that we had negative net worth for disclosure purposes as we happened to file our IPO papers with the Sebi on June 30. But let me repeat, that is a non-event as far as IndiGo and InterGlobe are concerned,” Ghosh said while formally announcing the IPO.
When asked about hefty payouts the promoters have been getting all these while, he said, “As a manager my mandate is to keep my customers happy, my employees happy and also investors/shareholders. I have been doing as a private company and will continue to do so as public company going forward.”
Ghosh said the company will launch its Rs 3,268-crore public issue, the first from the airline sector after the Spicejet IPO, on October 27 which will remain open till October 29. The Rs 10-share has been priced at Rs 700-765.
The public issue includes a share premium consisting of a fresh issue aggregating up to Rs 1,272.2 crore and offer for sale of up to 26,112,000 shares, comprising 3,290,419 shares by InterGlobe Enterprises; 3,006,000 shares by Rahul Bhatia who will retain just 40,000-share post-issue thus practically exiting the airline’s direct holding.
When asked about the public perception about Bhatia, who has been the face of the airline from day one, Ghosh said that even after the issue both the key promoters (Bhatia and Rakesh Gangwal) will hold over 47 percent each in the holding company, which in turn own the airline.”

Sunday, September 27, 2015

Air India to launch non-stop flight to San Francisco from Dec 2


THE HINDU,27SEP2015


Air India announced the launch of a non-stop flight to San Francisco from December 2, fulfilling a long-pending demand of Indian IT professionals.
“We are launching a direct non-stop flight to the San Francisco on December 2, as there was a demand for it,” Air India CMD, Ashwani Lohani, announced at an event to celebrate the World Tourism Day.
San Francisco will be the national carrier’s fourth destination in the United States after New York and Chicago, where it operates daily non-stop flights.
The Boeing 777-200 LR (Long Range) flight, to be operated on Wednesdays, Fridays and Sundays, will have a convenient early morning departure and arrival. Similarly, the return flight will have early morning departure from San Francisco and arrive here in the afternoon.
Air India officials said the flight will be a boon to the Indian diaspora on the US West Coast, as it will make travel easy and convenient for students, NRIs and business travellers looking for direct options to connect with India.
The new flight would connect passengers from Indian cities of Bengaluru, Mumbai, Chennai, Kochi, Hyderabad, Ahmedabad, Kolkata, Pune and Bhubaneswar.
Referring to Air India’s Discover India scheme, Mr. Lohani also said there was a deep connect between tourism and civil aviation sectors and the airline was in discussion with Tourism Ministry to launching various schemes in this regard.

Monday, September 14, 2015

125 AI cabin crew members to lose job over weight issues


THE HINDU,14SEP2015

Air India is likely to ground nearly 125 cabin crew personnel, including airhostesses, for not maintaining the weight standards prescribed by the Director-General of Civil Aviation.
Some of them may be assigned ground duty, while others can be offered voluntary retirement, airline sources said.
The national carrier had given an opportunity to around 600 “overweight” cabin crew members last year to “shape up” within a stipulated time frame following the DGCA guidelines.
“Of these 600 cabin staff, nearly 125, including airhostesses, failed to maintain the required body mass index (BMI) or weight standards. Now we have no option but to take them off permanently from flying duty,” sources said.
Air India has 3,500 cabin crew, of whom 2,200 are permanent staff and the rest are on contract.
By the DGCA norms, a BMI of 18-25 is normal for a male cabin crew member, while for a female, it is 18-22. A BMI of 25-29.9 for male crew is considered overweight and 30 and above is obese, while for females, 22-27 is overweight and 27 and above obese.

Thursday, September 3, 2015

Airfare cartelisation complaints keep coming up due to nature of industry: CCI Chairman

THE HINDU,03SEP2015

A group of parliamentarians led by BJP leader Kirit Somiya, had met Mr. Chawla and lodged a compliant against the airlines on the pricing practices.

Fair trade regulator Competition Commission of India is looking into the charges of cartelisation among the airlines in fixing airfares and the issue keeps cropping up due to the nature of the industry, its Chairman Ashok Chawla told The Hindu in an exclusive interview.
In May, a group of parliamentarians led by BJP leader Kirit Somiya, had met Mr. Chawla and lodged a compliant against the airlines on the pricing practices.
“Air fares are a cartel matter. One is ganging up and others are abuse of dominance. Whenever the prices go up suddenly and are abnormally high there is the feeling that the airlines are working in conjunction,” he said.
CCI have looked at the issue in the past three times and found there has been no evidence of cartelisation.
Currently, it is again probing whether there is cartelisation among carriers in fixing the price of air tickets on the basis of the complaint from Parliamentarians.
Minister of State for Civil Aviation Mahesh Sharma has said that Prime Minister Narendra Modi expressed concerns over the predatory pricing practices of domestic airlines and the ministry is trying to address the issue.
Mr. Chawla said that due to the concentrated nature of the industry the complaints on the issue come up again and again. “We are investigating the issue once again.”
He also admitted that there has been anxiety among the industry regarding the change in norms, which seeks more information in M&A deals.
The CCI had recently changed some of the norms, including the one, which requires companies to file adequate information at the first stage itself so that it speeds up the investigation process. It also said that the regulator can now invalidate notice seeking approval if the information provided is incomplete or inappropriate. Mr. Chawla said there need not be apprehension on this and CCI aim is to speed up the approval processes and not invalidate the application.

Wednesday, September 2, 2015

PM expresses concern over high airfares during festive seasons

THE HINDU,02SEP2015

Last week, Minister of State for Civil Aviation Mahesh Sharma had said the issue of predatory pricing has been a concern for majority of Parliamentarians as well as the Prime Minister.

Prime Minister Narendra Modi has expressed concern over steep rise in airfares during festive seasons and the Civil Aviation Ministry is looking at ways to curb such instances, a senior ministry official said.
The official said that Mr. Modi also asked whether there is way to handle the issue.
Prime Minister received a representation that airfares are high during the Onam festival that is celebrated in Kerala. At that time, many Keralites — working in the Middle East come home with their families — have to shell out high prices of air tickets, the official said.
“High airfares during festivals is a cause for concern. We will try to address both in international and domestic routes,” the official said, while ruling out the option of regulating fares.
One of the ways to reduce fares is through encouraging the use of unutilised bilateral rights with other countries, which would increase the availability of seats and result in reduced airfares, the official said.
Last week, Minister of State for Civil Aviation Mahesh Sharma had said the issue of predatory pricing has been a concern for majority of Parliamentarians as well as the Prime Minister.

Sunday, August 30, 2015

Carlyle looks to sell Landmark Aviation for $1.7 billion

THE HINDU,30AUG2015

Private equity firm Carlyle Group LP has been exploring a sale of aircraft leasing and maintenance company Landmark Aviation for as much as $1.7 billion, including debt, people familiar with the matter said on Friday.
The business jet market is slowly recovering from a downturn sparked by the global financial crisis, helping valuations for companies offering services to that industry.
Carlyle initially looked at cashing out of Landmark via a stock market listing, but in the past few months has broadened out that process to include a possible outright sale.
Two of the sources said that Landmark Aviation's earnings before interest, taxes, depreciation and amortization (EBITDA) were around $170 million over a trailing 12-month period.
The sources asked not to be identified because the deliberations are not public.
Carlyle declined to comment. Representatives for Landmark Aviation did not immediately respond to a request for comment.
Houston, Texas-based Landmark Aviation provides engine maintenance, repair and overhaul, and nose-to-tail services that include airframe, interior refurbishments, paint and charter management for private aircraft.
A peer of Landmark Aviation, Scottsdale, Arizona-based aircraft maintenance services company StandardAero, was sold by Dubai Aerospace Enterprise Ltd to buyout firm Veritas Capital Fund Management LLC in July for $2.1 billion.
In 2007, Carlyle had sold Landmark Aviation to state-owned Dubai Aerospace, which simultaneously purchased StandardAero in a joint transaction valued at $1.8 billion.
Dubai Aerospace sold Landmark Aviation to private equity firms GTCR LLC and Platform Partners a year later. Carlyle then purchased Landmark Aviation in 2012.
Separately, Carlyle announced the acquistion of cyber security firm Novetta Solutions on Thursday. Carlyle purchased McLean, Virginia-based Novetta from Arlington Capital Partners for $555 million, according to a source familiar with the deal.
Carlyle and Novetta declined to comment, Arlington Capital did not immediately respond to a request for comment. (Reporting by Mike Stone in New York; Editing by Carmel Crimmins and Lisa Shumaker)

Thursday, August 27, 2015

Modi’s concern over predatory airfares, likely cess on tickets


THE HINDU,27AUG2015


Prime Minister Narendra Modi has expressed serious concern over the predatory pricing by the domestic airlines, an issue that will be addressed shortly by the civil aviation ministry, which is also mulling a two per cent cess on tickets in its new aviation policy.
Civil Aviation Minister Ashok Gajapathi Raju said the new civil aviation policy, which is in the advanced stage of finalisation, would provide a long-term road map for the sector’s growth.
After his address at an industry event, Minister of State for Civil Aviation Mahesh Sharma said the issue of predatory pricing was a concern of a majority of Parliamentarians and the prime minister.
“The Prime Minister has shown his concern over the predatory pricing issue and it needs to be addressed,” he said.
The issue had come up during a presentation by the Civil Aviation Ministry to the Prime Minister on draft aviation policy on Tuesday, he said.
Mr. Sharma said the airlines need to reduce fares and not hike them particularly when it comes to emergency travel like in medical emergency, adding that there could be three approaches to prevent predatory pricing ways.
“We will take the airlines into confidence and tell them that the practice (of predatory pricing) is giving a bad name to the industry,” he said.
A mechanism can also be there through the Directorate General of Civil Aviation (DGCA) or through national carrier Air India to deal with the issue, he added.
Meanwhile, sources said the Civil Aviation ministry is looking at a levy of two per cent cess on air fares which will be part of the new aviation policy.
Under the new policy, the government is looking at enhancing air connectivity to regional and remote areas such as the North East, apart from other measures to boost the domestic aviation sector.

Friday, August 21, 2015

'Turnaround man’ Ashwani Lohani to head Air India

THE HINDU,21AUG2015

Ashwani Lohani, an engineer-turned-bureaucrat, was on Thursday appointed Chairman and Managing Director of the struggling state-run carrier Air India.
Mr. Lohani holds four engineering degrees, has authored two books (one on steam engines and the other on management) and is credited with the turnaround of the Madhya Pradesh Tourism Development Corporation and the India Tourism Development Corporation.
Mr. Lohani, who is the first Railway Service Officer to be made the Chairman and Managing Director of Air India, will succeed Rohit Nandan, a 1982-batch UP-cadre IAS officer.
His LinkedIn profile describes him as “a highly decorated officer who is also known as Mr. Turnaround.” He is at present working as Managing Director of MPTDC in Bhopal and was instrumental in promoting the “Hindustan Ka Dil Dekho” campaign in 2006. He is also credited with the turnaround of the ITDC post-disinvestment in 2001-02.
“When Mr. Lohani came to MP Tourism, it was in a very bad shape. In fact, tenders had been put out to sell the properties, but Mr. Lohani turned everything around. He is a very positive man, very approachable and cooperative. Every employee, no matter what the designation is, has direct access to him. He motivates people to work hard,” Suheil Qadir, general manager of MPTDC, told The Hindu.
Another government official, who has worked with Mr. Lohani in the past, said, “He is an honest professional and does not bow to political will. Looking at his considerable experience with public sector undertakings in the past, he could help turn around Air India.”
The task ahead
The job is cut out for Mr. Lohani as his appointment comes at a time when the government is trying to pull out the ailing Air India from its financial mess and put it on the road to profitability. The airline is at present surviving on a Rs.30,000-crore bailout package approved in April 2012 under a Turnaround Plan/Financial Restructuring Plan.
Air India reported a net loss of Rs.5,547.47 crore in 2014-15 on the back of total revenues of Rs.19,781 crore. While the loss was wider than in the previous fiscal, the airline managed to trim it from the 2012-13 figure of Rs.7,559.74 crore.
AI sitting on debts
The national carrier’s financial performance during 2014-15 fell well short of its internal estimates, which had pegged the net loss at Rs.4,346 crore and revenues around Rs.21,290 crore.
Besides, the carrier is sitting on a debt pile of Rs.50,000 crore and its combined losses stand at a whopping Rs.30,000 crore.
Mr. Lohani keeps an updated LinkedIn profile, tweets frequently and also has his own blog. A section on his LinkedIn profile states: “I can handle sick companies and turn them around. I can write well and can deliver highly effective motivational lectures to students and corporates.”

Monday, August 17, 2015

More aircraft will lead to lower fares: IndiGo President

THE HINDU,17AUG2015

IndiGo placed record 250 aircraft orders with Airbus, keeping in mind the growth potential in India in the next decade or so. And, more aircraft will lead to lower fares, a top official said. “India is a very under-penetrated market. Around 8.4 billion people travel through trains and less than one per cent of them fly. This indicates a huge opportunity in the coming years and a telecom-like revolution is definitely possible,” IndiGo’s President Aditya Ghosh told The Hindu in a telephonic interview. He pointed out that a Delhi-Bengaluru return ticket, which cost Rs.20,000 ten years ago, has now come down to Rs.12,000, despite an increase in fuel, wage cost and inflation.
“This is because the supply of aircraft has increased to 400 from 100. If we, as an industry, can increase the number to 1,000-1,600 aircraft and look at the benefits, we can accrue in terms of reduction in fares,” Mr. Ghosh said. He also said the aviation growth was linked to the GDP growth. “If you look at it from a 10-year perspective — let us say 2004 to 2013 — passenger numbers grew at 1.8 times the GDP growth. We have clearly noticed that there is a correlation between GDP growth and rise in passenger numbers. We are gearing up for the future growth story.”
Mr. Ghosh also said that the delivery of new aircraft would start from 2018, and some of it would be replacements.