Showing posts with label Air India. Show all posts
Showing posts with label Air India. Show all posts
Tuesday, 8 January 2013
Friday, 7 December 2012
Days logistics sector news
| Air India to get Rs 2,000 cr more as equity for revival |
| FM says there will be no additional borrowing in the remaining part of the current fiscal |
| Press Trust of India / New Delhi Dec 07, 2012, 20:52 IST |
http://www.business-standard.com/india/news/air-india-to-get-rs-2000-cr-more-as-equity-for-revival/198832/on
APL Logistics, Vascor venture to serve India’s auto sector
Rlys plans to develop LNG-based loco - BL Bureau
NEW DELHI, DEC. 7:
Russian Railways-backed joint company, BHEL and Hindustan Aeronautical Ltd-backed Indo Russian Aviation Ltd have expressed interest in developing a LNG turbine based locomotive for heavy and long haul operations.
Research Design and Standards Organisation (RDSO), the research arm of Indian Railways, had invited expressions of interest to develop a locomotive prototype equipped with a single gas turbine operating on LNG. This is expected to bring down the operating cost of locomotives.
Three parties have shown interest – joint stock company led by Russian Railway Research Institute, Moscow (Russian Railways, owned by Russian Government); Indo Russian Aviation Ltd and BHEL. Kotla Jaya Surya Prakash Reddy, Minister of State of Railways, stated this Rajya Sabha on Friday.
Tuesday, 13 November 2012
Friday, 2 November 2012
Tuesday, 30 October 2012
Thursday, 18 October 2012
Monday, 8 October 2012
Friday, 7 September 2012
Tuesday, 4 September 2012
Wednesday, 1 August 2012
Thursday, 26 July 2012
Tuesday, 3 July 2012
Air India pilot's strike: Same old story. Taxpayers left holding the bag in Bangalore Aviation on Tuesday, July 03, 2012 by Devesh Agarwal
Air India and members of the striking Indian Pilots Guild (IPG) appear to have reached an "agreement". For more than 58 days, the pilots have defied the courts and struck work.
Click to read on
http://www.bangaloreaviation.com/2012/07/air-india-pilots-strike-same-old-story.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BangaloreAviation+%28Bangalore+Aviation%29
Click to read on
http://www.bangaloreaviation.com/2012/07/air-india-pilots-strike-same-old-story.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BangaloreAviation+%28Bangalore+Aviation%29
Wednesday, 20 June 2012
How India's airline market lost its way by Vinay Bhaskara
When India’s Jet Airways, Kingfisher Airlines, and SpiceJet all recently reported large net losses for Fiscal Year 2012 on the heels of Kingfisher’s steep downsizing in February and March, it came as a surprise to many people around the globe who considered India, and its burgeoning airline industry, one of the world’s greatest success stories. But as with India’s economic growth story (GDP growth in the first quarter of 2012 was a (relatively by Indian standards) anemic 5.3%), beneath the shiny veneer lies a tottering industry that must take drastic steps in order to ensure its future. But before one can explore the solutions to these issues, it is helpful to look at what exactly created the problems.
Any attempt to assign the collective failure in the Indian airline market to one specific reason is highly disingenuous; it took a special confluence of factors to create this mess. Some of the major factors are outlined below.
Click to read onhttp://www.bangaloreaviation.com/2012/06/how-indias-airline-market-lost-its-way.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BangaloreAviation+%28Bangalore+Aviation%29
Thanks Bangalore Aviation
Thursday, 31 May 2012
Friday, 4 May 2012
Saturday, 28 April 2012
FDI in Civil Aviation – how it will help Part II - Archie D’Souza
In a report entitled India’s Experience with FDI: Role of a Game Changer prepared by ASSOCHAM in JAN 2012, there were several interesting and valid points raised on the role of FDI in the Civil Aviation sector. Reproduced below are some of its salient features. (Although I have not quoted the report verbatim throughout, through most of the text, the words are from the report)
The study of FDI in Civil Aviation observed:
• Huge amounts of additional investments required to realize the vision of the Civil Aviation industry as suggested in Working Groups report.
• Airport Infrastructure would require an investment of about Rs.67,500 crore during the 12th Plan of which around Rs 50,000 crore is likely to be contributed by the private sector.
• Airlines in India are expected to add around 370 aircrafts worth Rs.150,000 crore.
• Decade 2000-2010 witnessed a profitless growth. The Airline Industry in India suffers from huge debt burden – close to US $ 20 billion (Estimated 2011-12).
Allowing foreign airlines to pick up stake in three major Indian Airlines (Kingfisher, Jet Airways and Spice Jet) would result in capital infusion to the tunes of:
• Promoters off loading 26% of their Equity Stake can raise approximately upto Rs. 1341 crore.
• Figure goes approximately upto Rs.2530 crore in case 49 per cent FDI is allowed.
• Equity valuation at 26% of all issued shares (promoter and non-promoter) approximately comes out to be Rs.2835 crore.
• Estimates at 49% go approximately up to Rs.5341 crore.
The amount raised can be used to address working capital requirements of the airlines.
FDI in Civil Aviation
I. Importance
The aviation industry is critical for any nation to gain from participation in the global economy. Civil Aviation in its role of a key infrastructure sector facilitates:
• Growth of other industries
• Trade - by offering a reliable and faster mode of transport services to move products and personnel across long distances
• Tourism
• Generates both direct and indirect employment opportunities
The vision for the Indian civil aviation industry for the 12th Plan period is:
“To propel India among the top five civil aviation markets in the world by providing access to safe, secure and affordable air services to everyone through an appropriate regulatory framework and by developing world class infrastructure facilities”
II. Potential
A growing middle class supplemented with rise in disposable incomes, change in lifestyles, a globalized economy all act as drivers that project a huge potential for the industry. Another way of looking at the potential of the sector is by comparing the domestic tariff of another emerging economy China. Domestic traffic in China is believed to be five times the size of India’s despite having a population just 10% larger.
Forecast of air traffic carried out for 12th plan period suggests:
• Domestic passenger throughout would grow at an average annual rate of around 12%.
• Domestic passenger throughout is expected to touch around 209 million by FY-17 from 106 million in FY-11.
• International passenger throughout is estimated to grow at an average annual rate of 8% during the 12th Plan period
• International Passengers to reach 60 million passengers by FY-17 from 38 million in FY-11.
[please read the full report for the references]
While the report speaks about the huge investments required in various sub-sectors like Airport Infrastructure, I shall confine this discussion to FDI in airlines only and keep the other sectors for a future discussion. According to the report the amount required for fleet expansion is US$ 43 b (INR 2.15 L cr). To cater to the increasing international and domestic traffic airlines are expected to add around 370 aircraft to their fleet. I will not go into individual airline requirements although the report has. Where is this money going to come from and how will the Civil Aviation Ministry’s vision be realized? The report says that “looking at the existing financial status of the industry the achievement of set objective seems ambitious.”
Let us look at the current status and the not-too-distant past (all figures from the report). The decade 2000-10 witnessed a profitless growth phase of the airline industry. During the three-year period between APR 1, 2007 & MAR 31, 2010, Indian carriers incurred an accumulated loss in excess of US$ 5.2 b (INR 26,000 cr). As per certain estimates, the airline industry in India suffers from a debt burden of close to US$ 20 b – a very huge amount by any standard. Half of this is aircraft related and the rest for working-capital loans, payments to airport operators and fuel suppliers. Although the report has cited high cost of operation being a cause for adversely dented financials, I don’t agree. Irrational (competitive is the word the report uses) pricing policies has definitely played a part.
In part I of this same article, I have strongly advocated the cause of FDI in civil aviation. Here too I wish to harp on the same issue. I’m not in favor of any kind of government bail-out to any carrier including the public-sector one. Regarding my remedies for Air India, please read my earlier post on the same blog. Here I’ll state how mainly citing the report’s recommendations.
Raising such huge amounts of investments would require the government to adopt a more progressive and positive fiscal regime as well as develop a collaborative approach with industry. Civil Aviation industry would require not only large but continuous flow of funds if the next phase of growth needs to take place. For this to happen the government must relook at its FDI policy which disallows foreign airlines from purchasing equity of domestic airlines. One of the reasons successive governments have been citing against foreign airline equity participation is that the US doesn’t allow it. My rebuttal to this is – why follow the US model or example? Why not one of our own?
This is what direct investment by foreign airlines would do (according to the report):
• Provide managerial and technical expertise needed to improve productivity
• Raise much-needed capital for the private-sector players
• Improve operating standards and services
• Add brand value (my addition)
• Spread out the network of Indian carriers (again, my addition)
Here is an estimate of the amount of capital that can be raised by three prominent Indian private airlines shows (foreign non- airline investor’s equity has not been considered in estimation):
• The promoters by off loading 26 % of their Equity Stake can raise up to Rs. 1341.45 crores.
• This figure goes up to Rs. 2528.3 crores in case 49 per cent FDI is allowed.
• Combined equity valuation (promoter and non-promoter) at 26 % comes out to be Rs. 2834.27crores.
• The valuation at 49 % goes up to Rs. 5341.52 crores.
The capital raised from equity sale can be used to address the working capital requirements of the airlines. The report gives a detailed table for each of the carriers. I’d suggest that readers look at it.
Here are a few other benefits from FDI. It has, since 1991, proved to be a game-changer for wide segments of Indian industry. Wherever it has been allowed it has transformed those industries in ways that are now irreversible.
To conclude, I’d like to state that if India has to emerge as a global player in civil aviation, FDI in the airline industry is a must.
Tuesday, 24 April 2012
Air India - a way out of the mess sans tax-payer's money by Archie D'Souza
Air India's mess only strengthens the case for throwing open the domestic aviation space to foreign airlines.
Viewed purely from a public policy perspective, the decision to use taxpayers' money for bailing out Air India cannot be justified. This is a company whose operations cannot even remotely be seen as touching the lives of the vast majority of Indians. Also, the sums involved are, by no means, small. The Government is trying to save a company with accumulated losses of over Rs 27,000 crore and outstanding debts of Rs 43,000 crore. The absurdity becomes even more manifest as it is engaged in a business that does not really demand the Government's direct involvement, whether for socio-economic or strategic reasons. Having said that, it must be admitted that the Government was left with little or no option in what it has undertaken to do. The company is saddled with a vast workforce, whose livelihood concerns it cannot be totally indifferent to. Some of the bailout money for Air India is actually going towards paying salary arrears. Another chunk is also going to be used for settling the dues of public sector oil companies, who would not have accommodated the airline with liberal credit for extended durations without some gentle nudging by the Government in the first place. Besides, one cannot ignore the series of managerial blunders – presided over by a succession of ministers in charge of the aviation ministry – that had brought the national carrier to its financial ruin. Taken all in all, there is some serious moral imperative behind the Government's actions to save the company.
That does not however take away the fact that the so-called turnaround and financial restructuring plan for Air India, approved by the Union Cabinet on Thursday, runs the risk of throwing good money after bad. While there may be leakage of resources of monumental proportions on the expenditures the Government incurs on subsidies, the National Rural Employment Guarantee Act and a plethora of other welfare programmes, these can be criticised only on grounds of poor implementation or their benefits not reaching the intended beneficiaries. But the basic idea of state funding for schemes aimed at the poor and vulnerable sections cannot be questioned. That cannot be said, though, about civil aviation, which is hardly a priority area for direct government involvement. The irony is complete when one considers that the Government has been niggardly in its support of the Railways, which carries in three days what the entire domestic aviation industry does in an entire year.
The best solution for Air India is for the Government to create conditions, which enable the airline to be taken over in a manner that does not generate industry-wide turbulence. The mess that Air India has slid into, indeed, only strengthens the case for throwing open the domestic aviation space for foreign airlines. It would be a win-win not only for consumers (who stand to benefit from new players coming in), but also existing cash-strapped airlines (including those other than Air India) whose promoters want to sell out. The latest approved plan, by contrast, neither envisages Air India's takeover nor sees it generating even cash profits till 2018-19. The country's taxpayers should be spared from such ‘turnaround' and ‘restructuring' packages.
(This article was published in the Hindu Business Line on April 13, 2012)
________________________________________
My comments
This is my third article in a series about what ails the aviation industry in India and what the right and wrong solutions are. In this article I shall confine my discussion to Air India. I am not going into the pros and cons of nationalisation and public sector monopoly, although I’ve always maintained that the government has no business to be in certain businesses and aviation & hospitality top that list.
The entity that is Air India today is a result of the merger of two culturally diverse organisations – Air India which is also the name of the merged enterprise, and Indian Airlines. When the then Civil Aviation Minister, Mr. Praful Patel, decided on a merger, his thoughts were purely from a commercial point of view. Remember, Mr. Patel is a businessman and his thinking would be on those lines. The merger of the two airlines has been mooted in the past too. Mr. Patel had a valid point when he talked about synthesising the strengths of the two organisations. His calculation went awry when he decided to overlook the individual and combined weaknesses. Here are some moot points I’d like to mention – some cultural, some commercial:
• Up to 1992, Air India was one of the best international carriers in the world. It operated in a very competitive environment and competed with the best
• Indian Airlines, on the other hand, was more of a bureaucratic organisation enjoying a monopoly in its market. The moment it faced competition it started losing business. Its market share started declining rapidly and in no time it lost its number one status. The service levels of Indian Airlines, or rather its new avatar Air India’s domestic services, are much better than what it used to be, but just not good enough compared to the competition. If I am to take a domestic flight today, Air India is my last choice. Before private domestic airlines came into being, I had no choice but to use Indian Airlines. On the international sector, a choice always existed and we exercised it very often in favour of the national carrier.
• Air India and Indian Airlines had between them some of the best training facilities in the world. This applied to both technical and non-technical training.
• The same can also be said with regard to maintenance facilities
• In Chef-Air Air India had one of the best flight kitchens in the world. It was a division of the now defunct subsidy of Air India – the Hotel Corporation of India which, also ran the Centaur chain of hotels
• The real estate, both commercial and residential, that these two airlines own is phenomenal
So, what happened and how did things come to this sorry state of affairs? I will go into that at some later date. Right now I’d like to offer solutions which can be worked out if the government of the day has the political will to make it happen.
The newspaper report I’ve quoted in the beginning offers the following:
“The best solution for Air India is for the Government to create conditions, which enable the airline to be taken over in a manner that does not generate industry-wide turbulence. The mess that Air India has slid into, indeed, only strengthens the case for throwing open the domestic aviation space for foreign airlines. It would be a win-win not only for consumers (who stand to benefit from new players coming in), but also existing cash-strapped airlines (including those other than Air India) whose promoters want to sell out. The latest approved plan, by contrast, neither envisages Air India's takeover nor sees it generating even cash profits till 2018-19. The country's taxpayers should be spared from such ‘turnaround' and ‘restructuring' packages.”
So, the Government needs to “create conditions, which enable the airline to be taken over in a manner that does not generate industry-wide turbulence.” How exactly would these conditions be created? If I were in the Civil Aviation Minister’s shoes and assuming, as highly improbable as it may seem, that I was carrying the coalition partners with me, these are the steps I’d take:
• Demerge the two carriers. May seem to be a Thuglak-like solution but if the carriers have to be saved (using national resources paid for by taxpayers to prolong their life is not saving them) there is no alternative
• Hive off some of the facilities into separate companies/entities. Examples of these would be:
o Training – technical & commercial, separately
o Maintenance
o Real estate – commercial & residential separately
o Catering
o Medical clinics (these are huge with some of the best equipment in them)
Once these steps are taken, let each new entity be evaluated by one or more teams of experts. Other than the training facilities, convert each unit into a company and auction them individually to the highest bidder. Allow the existing players to bid with the condition that Air India and Indian Airlines must go to separate buyers. Allow potential buyers to form consortia, but the names and investments of all parties must be made public. Foreign airlines may be part of these consortia. This will result in no loss of jobs, with not a penny coming from the taxpayer. In fact the companies so formed will need professional and non-professional staff. Instead of money flowing out of the national exchequer it would actually flow in.
What should be done with the training facilities? These should be converted into centres of excellence. I’d moot separate centres for commercial and technical training. Convert them into not-for-profit organisations with financial contributions from all players involved in the aviation industry. IATA too could be a player here. This would result in India becoming one of the biggest centres for aviation education in the world. What we need is a political establishment with the necessary world vision.
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