SpiceJet issue, safety downgrade marred civil aviation sector

THE HINDU,29DEC2014

SpiceJet’s near-shutdown and the downgrade of India’s safety ranking marred the civil aviation sector in 2014 which also saw a new airline taking to the sky and another one readying itself to do so early next year.

National carrier Air India became part of the 27-member global airlines grouping Star Alliance, as budget airline AirAsia India launched operations and Tata-SIA joint venture carrier Vistara received the flying permit and announced its intentions to start operations from January 9.

Jet Airways also completed 24 per cent stake sale to Abu Dhabi carrier Etihad for Rs 2,058 crore.

A change of government saw incumbents Ashok Gajapathi Raju and Mahesh Sharma in the cockpit of the Civil Aviation Ministry, which came out with a long-awaited draft policy for the entire sector emphasising on air connectivity to remote places. It is currently under discussion among stakeholders.

After suffering a full closure for almost a day, SpiceJet averted a shutdown as it attracted new investment from one of its founders, Ajay Singh, who along with US-based JP Morgan Chase are expected to pump in $200 million to pick up stake from current promoter Kalanithi Maran and his Sun Group.

While there was no major mishap during the year, a SpiceJet flight, carrying 140 passengers, had a close shave when a buffalo came on the runway at Surat airport and hit it, forcing the pilot to abort take-off. This led aviation regulator DGCA to take preventive measures at 18 identified airports to prevent such recurrence.

The year began on a negative note as US Federal Aviation Administration (FAA) downgraded India’s aviation safety ranking from top category-I to category-II, bringing it below Pakistan and on par with countries like Ghana, Barbados and Bangladesh on January 31.

The ranking is likely to remain grounded till March next year as the FAA carried out its audit this month and found that several deficiencies are yet to be rectified.

The change in political leadership brought much hope for the aviation sector, which was for long seeking attention of decision-makers to address issues like infrastructure, high taxes and costs.

No decision was taken to curtail taxes on jet fuel which comprises 40-45 per cent of an airline’s operational costs, while the industry’s long-pending demand for abolition of the rule that allows a domestic carrier to fly abroad only after five years of domestic operations and a 20-aircraft fleet, also remained unfulfilled.

This was in spite of both previous and the present dispensations favouring doing away with the norm on several occasions.

For the airline sector, the year was a mixed bag with Malaysian no-frills carrier AirAsia’s Indian subsidiary AirAsia India taking off with its first flight on June 12, making it the fourth Indian budget carrier after IndiGo, SpiceJet and GoAir.

Naresh Goyal-promoted Jet Airways completed transaction of 24 per cent stake sale for Rs 2,058 crore and offloading of 51 per cent holding for USD 150 million respectively to the Gulf carrier Etihad.

Faced with a series of losses, Jet switched over to single-brand business model, phasing out its low-cost subsidiary JetLite from early December. The airline also saw the exit of two top officials besides several other senior executives in quick successions during the year before finally getting former Air Seychelles chief executive Cramer Ball at the helm.

Tata-Singapore Airlines’ joint venture full service carrier Vistara announced launching of its flight services from January 9 soon after it received Air Operator Permit from the Directorate General of Civil Aviation, which was earlier held up due to some regulatory issues.

During the year, Rahul Bhatia-promoted IndiGo maintained its numero uno position in terms of market share and placed order for 25O Airbus A-320 Neo planes for USD 25.5 billion. It also completed its 2005 order of 100 A320s with the Airbus, taking the 100th aircraft delivery in November.

Besides, the carrier also revived plan to raise USD 400 million from the capital market.

Cash crunch-hit SpiceJet, which triggered the first low-fare war of the year as early as January 21, announcing almost 50 per cent reduction in ticket prices, unleashed a series of such heavily-discounted offers throughout the year to mop up cash for running the airline.

This forced other carriers to slash fares and, due to this, air fares remain on the lower-side for most part of the year.

SpiceJet averted a closure for want of cash early December with the aviation ministry intervening and requesting the oil companies and AAI to extend to it a 15-day credit facility for jet fuel supply and landing and parking payments.

Only after this the airline resumed its operations, after remaining grounded for over 10 hours on December 17.

Another budget carrier GoAir seemed steady but the airline not only deferred the delivery of its 20th aircraft, but also its international operations to next fiscal.

During the year, Mumbai joined the league of cities with the state-of-the-art airports with the then Prime Minister Manmohan Singh inaugurating Terminal 2, constructed at a whopping cost of Rs 7,452-crore, at the Chhatrapati Shivaji International Airport on January 10.

But the much-talked about handing over operations and management of six airports — Kolkata, Chennai, Jaipur, Guwahati, Lucknow and Ahmedabad — to private companies did not materialise due to Lok Sabha elections and the subsequent change in government at the Centre.

The BJP-led government now has plans to hand over management and operations of both Chennai and Kolkata airports to private parties.

The year 2014 also witnessed a number of other incidents involving almost all domestic carriers.

Prominent among them were two fire incidents in an aircraft of IndiGo, one at Kathmandu airport and another at Delhi airport.

A Jet Airways plane carrying 300 people plunged 5,000 feet while pilot allegedly took a nap and co-pilot was playing on a tab with DGCA threatening to suspend the licence of some 140 pilots for various alleged violations, hitting the headlines during the year.

SpiceJet submits revival plan to government

THE HINDU,26DEC2014 

Troubled budget carrier SpiceJet today submitted a revival plan to the government on the basis of a proposed investment of $200 million from founding promoter Ajay Singh and US-based JP Morgan Chase.

“It was a constructive meeting,” the airline’s Chief Operating Officer Sanjiv Kapoor told reporters after he submitted the plan to Civil Aviation Secretary V Somasundaran at the Ministry headquarters here.

He was accompanied by Mr. Singh, the original promoter who is reinvesting in the carrier.

Maintaining that there was “no outstanding” as of now with any oil marketing company, he said with 18 operational Boeing aircraft, Spicejet was currently flying 230 flights a day.

“Spicejet has many well wishers including Ajay Singh,” the COO said.

Besides Mr, Singh, a fund managed by JP Morgan Chase would also be one of the investors. The potential investors are likely to buy stake from current promoter Kalanithi Maran by infusing USD 200 million within a month to help the airline stay afloat.

The airline has already received Rs 17 crore from the investors, official sources earlier said, adding that “it has wiped off all its dues to the oil companies“.

The no-frill carrier’s dues to foreign and Indian vendors, airport operators and oil companies had grown from Rs 990 crore to Rs 1,230 crore between November 24 and December 10, according to data provided by the airline to the Civil Aviation Ministry.

The airline’s dues to foreign vendors, including lessors of aircraft and maintenance, repairs and overhaul (MRO) facilities, had risen from Rs 624 crore on November 24 to Rs 742 crore on December 10, according to the data. Spicejet owes banks Rs 300 crore against collateral.

Govt. considering cap on maximum economy air fare

THE HINDU, December 24, 2014

Government is considering capping economy air fares at Rs. 20,000 to check airlines from charging “exorbitant” fares or unleashing predatory pricing, affecting their own financial health.

The proposal comes in the backdrop of SpiceJet episode, which had come out with a series of low-fare offers throughout the year to beat competition and then facing cash crunch.

“Steps may be taken to fix minimum and maximum air fares.... There is a need to fix a cap on the maximum air fare of economy class at a reasonable price of around Rs. 20,000 beyond which the airline should not be allowed to charge, exploiting the passengers’ urgency for travel due to various reasons,” the Civil Aviation Ministry said in internal note.

The government is of the view that some of the companies are in danger of facing huge losses due to these huge discounts in fares with some of the fares not even covering the operating costs, it said, adding,” if the situation is not contained, some of the airlines in the country may face closure in near future.”

According to the note, the airlines can be asked to submit their break-even price per kilometer, which will depend on the service offered and the type of aircraft among other factors.

“An appropriate profit can be added to the break-even price per km and that can be minimum price per km to be charged by the concerned airline,” the note said.

The steps will ensure that no airline will go into losses, it said adding the carriers should be asked to fix their air fares in such a way that Earnings Before Interest, Depreciation and Tax (EBIDTA) should be positive.”

The note also said that the airline companies were charging very high spot fares and that there were large number of complaints received from Jammu and Kashmir and North East region, Andaman and Nicobar and several other places in the country.http://www.thehindu.com/business/Industry/govt-considering-cap-on-maximum-economy-air-fare/article6723058.ece

Vistara gets licence to fly

THE HINDU, 15 DEC 2014

Paving the way for Vistara to begin commercial operations, the airline on Monday received its air operator permit (AOP) from the Directorate General of Civil Aviation (DGCA).

“The AOP is a significant milestone as it is the final step in a highly technical and complex compliance process,” the company said in a statement.

Vistara is a 51:49 joint venture between Tata Sons and Singapore Airlines Ltd. The company, which will be headquartered here, will begin operations with its fleet of brand new Airbus A 320-200s. It will soon make an announcement on the start of sales, routes and schedules.

Vistara CEO Phee Teik Yeoh said, “I am delighted that we have successfully cleared the final requirement and secured the AOP. We are thankful to the Ministry of Civil Aviation for their support and guidance during the entire process. All our energies now are going to be concentrated towards fulfilling the Vistara brand promise.”

Keywords: Tata, Singapore Airlines, Vistara, DGCA, aviation

Dubai to invest $32-billion to build world’s largest airport

http://www.thehindu.com/news/international/world/dubai-to-invest-32billion-to-build-worlds-largest-airport/article6648501.ece

To further secure its position as the world’s aviation hub, Dubai Airports is building a whopping USD 32—billion greenfield airport at the upcoming Dubai World Central, 30 km off the present international airport which already is the second busiest in the world.

The proposed new airport will become the world’s largest aviation facility on completion and will have five runways which all will be simultaneously operational, all A380-compatible with a length of 4.5 km each.

“We are planning a USD 32—billion brand new airport at the Dubai World Central at Al Maktoum, 30 km off the present Dubai facility. In the first phase, the new airport will be able to handle 120 million passengers, which will go up to 200 million by 2020, when the project is completed,” Dubai Airports Corporate Communications Head Julius Baumann told PTI.

“On completion, the new airport will be the world’s largest airport, with each concourse the size of seven football fields and have five runways which all will be simultaneously operational, all A380-compatible,” Mr. Baumann said.

The other features include 200 aircraft stands for wide bodied aircraft, four concourses connected via six airport trains to two terminals, which in turn will be linked to the city’s metro network. When complete, the mega-hub will have total annual capacity exceeding 200 million passengers and 12 million tonne of freight.

The existing Al Maktoum International opened its doors to passengers on October 27, 2013 and three airlines are operating from here. It has one A380 capable runway, 64 remote stands, one cargo terminal with annual capacity for 250,000 tonne and a fully operational passenger terminal building designed to accommodate 5 million passengers annually.

The Dubai International Airport is the world’s second busiest airport after the London Heathrow and is on course to become the global aviation hub, thanks to its geographical location and the availability of cheap fuel.

The first phase of the new airport includes a single A380 compatible runway, a passenger terminal with capacity of 5 million passengers which is expandable to 7 million; a cargo terminal with a capacity of 250,000 tonne per annum and expandable to 600,000 tonne and a 92-metre air traffic control tower.

The state-owned Dubai Airports already operates the Dubai International Airport in the heart of the Arabian megapolis and the Al Maktoum International Airport at the upcoming Dubai World Central (DWC).

The DWC is a 140 sq km new international city being built to de-congest the present city, Dubai Airports’ Marketing & Corporate Communications Manager Zaigham Ali said, adding the work on new airport will begin early next year.

Apart from the new airport plan, the Emirate is also expanding the Dubai International Airport with a USD 7.8 billion investment to take the capacity to 100 million by 2020. This project was started in 2011 and will be completed by 2016.

The expansion of the Dubai International include a new concourse (Concourse D), expansion of Terminal 2 to twice its current capacity, refurbishment of Terminal 1, and additional aircraft stands, taxiways and aprons among others.

Dubai International, Mr. Baumann said handled 66.43 million passengers in 2013, and has being growing 15.5 per cent per annum since its launch in 1960. In 2013, it was named the second busiest airport in the world after the London Heathrow.

Mr. Ali said India is the largest source market for the airport, with an airline network that connects Dubai with 18 cities in the country.

In 2013, the airport saw a 14.3 percent increase in passenger numbers from India at 8.5 million and in the first 9 months of this year, the number has already crossed 7 million.

Mr. Ali added the company is confident of crossing the last year’s mark this year.

Explaining the rationale for a gigantic new airport, Mr. Baumann said the airport’s forecast figures for unconstrained passenger traffic show 126 million passengers by 2020, and 300 million passengers by 2050.

Additionally, the Terminal 2 will double in capacity by 2015. Concourse D of the airport, slated to open by mid 2015, will provide for 100 more aircraft and taking the figure up to 80 million passengers.

In all, the expansion projects will take the airport’s passenger capacity to a little over 100 million passengers, Mr. Ali said.

With a built-up area of 1,972,474 sqm, the Dubai International Airport comprises three terminals and ranks among the world’s top two busiest airports for international passengers, serving over 125 airlines flying to over 260 destinations, as per the Airports Council International.

On the economic impact of the aviation sector in Baumann, quoting an Oxford Economics report said, aviation will contribute USD 53.1 billion to Dubai’s economy, which is 37.5 per cent to its GDP and will support over 750,000 jobs by the turn of 2020.

The aviation sector as a whole contributed USD 26.7 billion to the Dubai economy in 2013, which was almost 27 per cent of the national GDP and supported 416,500 jobs accounting for 21 per cent of the Emirates’ total employment.

Passenger traffic in September totalled 5,942,628 compared to 5,407,326 recorded in the same month last year, an increase of 9.9 per cent. January—September rose 6.2 per cent to 52,422,547, up from 49,379,165, while in 2013, the passenger traffic stood 66,431,533, up 15.2 per cent from 2012.

Keywords: Dubai airport, Dubai World Central