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.

Keywords: Jet Airways, IndiGo, Competition Commission of India, Competition Act, 2002THE HINDU,18NOV2015

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.

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.

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.

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.

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.