AIR India Pre Destined for Disinvestment.Panel pill for AI turnaround

Troubled Galaxy Destroyed Dreams, Chapter 311

Palash Biswas

Let professionals run Air India

28 Jul 2009, 0635 hrs IST, M K VENU, ET Bureau

The bureaucrat, especially of the IAS variety, is indeed a strange creature. By and large, the IAS instinct is to keep getting promotions, as far as

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Air Force One
India's Air Force One
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possible, by not doing anything proactively. There is a sound logic to this evolved art of not doing anything.

For, if you become too proactive the chances of making mistakes become high. For instance, E Sreedharan is a highly regarded doer, and he has made some mistakes while trying to implement the Delhi MRTS project within deadline. This is the moment a typical babu waits for.

Governance comes to a standstill when everyone waits for the others to make a mistake. A time comes when there are no mistakes, and no action! Prime Minister Manmohan Singh needs to seriously do something about this aspect of governance.

Sreedharan has amply demonstrated his implementation skills and is hugely popular among the people. The IAS lobby, which was perhaps waiting for Sreedharan to make a mistake, must now realise that the times have changed. People would prefer guys who make mistakes and yet do something substantive on the ground.

Also Read

→ SBI Caps to give Air India wings

→ Government asks Air India to cut costs

→ Air India eyes Rs 10, 000 cr bailout package

→ Govt likely to contribute only part of AI bailout package

→ Now, Air India says it needs an urgent infusion of Rs 20K cr

A current example of a good project given a bad name by safe-playing bureaucrats is the merger of Air-India with Indian Airlines. Union civil aviation minister Praful Patel has taken a lot of flak for floundering on the merger project. The truth is the idea of a merger between A-I and Indian Airlines is very sound but the babus, who zealously protected their turfs, did not want to implement it sincerely.

Some of the bureaucrats involved in the project have since got good promotions and hold positions in the rank of secretary to government. One of them now has an even more onerous task than turning Air India around. He faces the challenge of rescuing Prasar Bharti, where a bunch of ex-bureaucrats are fighting a prolonged and utterly ridiculous legal turf battle.

Coming back to Air-India and Indian Airlines, Praful Patel has yet another chance to put through the merger project and make the new entity accountable with a professional management running it. The merged entity, National Aviation Company of India Ltd (NACIL) has accumulated losses of over Rs 7,000 crore till March.

The losses piled up simply because the company incurs an annual cost of Rs 17,000 crore and gets revenues of Rs 14,000 crore. The Rs 3,000 crore annual deficit is the crux of the problem. The situation worsened last year as global aviation industry was hit by a severe recession. Even well-run private airlines like Jet Airways and Kingfisher have run up massive losses. In desperation, Jet and Kingfisher had even announced a strategic alliance last year to cut costs.

Therefore, it makes eminent sense for A-I and Indian Airlines to cut costs by optimising resource usage. The two can rationalise human resource which is 20% of the total cost. An attractive VRS scheme for the employees must help in reducing staff by at least 10%. The merged entity has a staff of over 30,000, which is way too high. The employee to aircraft ratio is currently at over 220, which is much higher than the norm of 110 to 130 persons per aircraft.

Airline asks for Rs 7,000 cr; may get half subject to conditions.

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http://www.business-standard.com/india/news/link-air-india-bailout-to-performance-says-govt/365144/

Nearly 550 candidates interviewed by Air India in April for the post of trainee cabin crew are virtually languishing. The airline has still not made public the results or sent any formal communiqué to them.

Air India had first advertised for recruiting trainee cabin crew last August for its Airbus 320 aircraft. The first round of interviews was held in October in four regional centres, which comprised group discussions and personality assessment test. The results were declared on October 13, said an airline source.

Liquidity crunch

While Air India maintained that it would get back “immediately” to the candidates on the next round of interviews and medical tests, they were only intimated in April this year. The interviews were then held between April 17 and 20 but there has been complete silence since, said a source.

It is hardly difficult to pinpoint the reason for this delay, which is merely a fallout of the airline’s current liquidity crunch. The irony is that despite its 31,000 bulging workforce, it is facing a shortage of cabin crew in its domestic and some short-haul international operations, undertaken by IC coded flights (the former Indian Airlines).

An Air India spokesperson declined to comment on the issue.

A trainee cabin crew in the airline earns approximately Rs 28,000 a month (inclusive of variable flying allowance) along with benefits such as provident fund, gratuity, pension, medical facilities, and free or concessional air travel.

Crew requirements

Over the last few months, Air India has barely been meeting the mandatory crew requirements set by the Directorate-General of Civil Aviation. Typically, an Airbus 320, which has a minimum requirement of four crew members, needs a (crew) complement of at least six. However, the airline has confined this to the basic four onboard.

On the other hand, private airlines, which have also gone in for stringent cost-cutting measures such as pruning capacity, rationalising routes and laying off staff, have managed to hold on to the required crew complement.

For instance, Jet Airways, which uses mainly Boeing 737s for domestic operations, deploys six crew members even though four would suffice, said a company executive who did not wish to be named.

The central government is considering a plan by the state-run airports operator to sell bonds worth Rs5,000 crore for funding the renovation of airfields. Airports Authority of India (AAI) is seeking to issue infrastructure bonds, civil aviation minister Praful Patel told Parliament on Thursday. The operator has a plan to spend Rs12,434 crore in the five years ending March 2012, he added.

Air India has raised $1 billion from J.P. Morgan Chase and Company to pay for 10 aircraft including seven Boeing 777 and three Boeing 737.

The 11-year loan will also help the State-owned airline save on interest costs as the loan has been raised at 100 basis points above LIBOR (London Inter Bank Offer Rate), a senior airline official said.

The airline had floated the tender to raise $1 billion for financing the aircraft purchase in February this year and the mandate was won by J.P. Morgan, in May. The acquisitions are part of the order for 111 aircraft including 68 Boeing and 43 Airbus aircrafts placed by the state owned airline.

In the last three years, Air India has paid $1,935.5 million for purchase of 24 aircraft while Indian Airlines has purchased 24 aircraft at a cost of Rs 4,738 crore, the Minister for Civil Aviation, Mr Praful Patel, told Parliament recently.

With private airlines suspending operations on August 18, the government on Friday said it does not support any move to inconvenience the

travelling public and asked the carriers to engage in a dialogue.

"The government understands the problems being faced by the aviation sector. However, it does not support any move that will inconvenience the travelling public in the country," civil aviation minister Praful Patel said.

"We advise the airlines to engage in a dialogue with the government," he said.

Referring to the issues raised by the federation of Indian airlines at a meeting in Mumbai, Patel said "the issue of tax on ATF is a state issue and the aviation ministry has been requesting the states for the last few years to see reason."

He said the other issues primarily relate to the economic slowdown and the impact of high ATF prices in 2008-09.

In the wake of the call to suspend services by the private carriers, Patel said Air India would not participate in the decision of "select private airlines and will mount additional services on August 18 so as to reduce any inconvenience to the public".

Civil aviation minister Praful Patel has said that Air India will not participate in the strike called by private airlines on August 18.

He added that the national carrier will increase number of flights so as to people may not have to face any inconvenience.

Responding to the demand by private airlines the minister said that sales tax on aviation turbine fuel (ATF) is state subject and the ministry had been asking the states to bring down the tax on jetfuel.

Mr Patel asked the airlines for a dialogue with the government.

Air India, which has been facing a financial crunch has seen its borrowings rising to Rs 15,241 crore in June this year from Rs 6,550 crore in November 2007, the Minister added.

The huge cost of inducting 111 aircraft at about Rs 45,000 crore and low-yields have resulted in the airline reporting a loss of Rs 5,000 crore last year.

Air India pilots and air hostesses may soon fly to overseas destinations and come back — as passengers — on the return leg of the flight

to avoid huge hotel expenses abroad. What’s more, the temporary postings of AI engineers abroad to check the aircraft may also be scrapped.

The aircraft engineers could also fly on the plane and check it before the return leg and avoid the huge expense of being posted abroad.

‘‘Some unions representing pilots, cabin crew, and engineers have themselves come forward with this cost-cutting move. Hotel tariffs abroad are in the range of $200-400, in addition to $200 as daily allowance. The foreign stay of crew costs a huge amount and if they return on the same flight, the savings will be enormous,’’ said highly placed sources.

This new concept could be introduced on almost all AI international flights except the ultra-long haul Delhi/Mumbai-New York that have a flying time of over 16 hours. This aircraft reaches JFK Airport in the morning and then takes off late evening. Clearly, such a long return trip, within the space of 12-13 hours is not possible for the crew or engineers. Other flights, like India-Frankfurt or London, could however be under the ambit of the proposed change.

In fact, Jet Airways has some months back started this policy on nearby Gulf and Southeast Asia sectors. The idea — save hotel accommodation and daily allowances.

Apart from this, the problem of having an unduly large number of Indian Airlines pilots positioned in Delhi and Mumbai could also be resolved by an equitable distribution all over the country. Pilots fly — as passengers — to other stations from the two metros to operate flights out of those cities. Thy get a certain portion of their flying allowance even while they fly as passengers to operate flights and the airline shells out several crores under this head.

While most AI employees blame mismanagement in the past few years and government interference for the mess, they are now actively participating in the process to save the airline. While pilots and air hostesses has approached the management with the return-on-same-flight concept, the junior-level employees are offering to work extra at no extra cost.

The increase in borrowing has been due to a variety of factors, including servicing of debt on account of purchase of new aircrafts. The increase in operating losses, the economic recession and the high price of aviation turbine fuel also led to the airline’s borrowings increase, the Minister said.

Meanwhile, the Ministry of Finance has issued an official order asking all Government officials to fly Air India for their domestic and international travels when on official work. “For travel to stations not connected by Air India, the officials may travel by Air India to the hub/point closest to their eventual destination, beyond which they may utilise the services of another airline which should also preferably be an alliance partner of Air India,” the official order states.

Indian flagship carrier Air India, struggling with massive losses, is in talks to cancel orders for six Boeing 777 planes, an airline spokesman said Friday.

"Air India is in dialogue with Boeing for cancellation of six B-777 aircraft deliveries... in view of the current global aviation scenario," the Air India spokesman said.

State-run Air India in 2006 signed a formal agreement to buy 68 Boeing airplanes in a deal that was estimated to be worth around 8.0 billion dollars.

The carrier said it would buy 23 Boeing 777s, 27 787-8 Dreamliners and 18 next-generation 737-800s.

The list price for a single aircraft varies from 165 million to 200 million dollars but Air India was believed to have negotiated a lower price because of its large order.

The airline faces financial turmoil after posting an estimated one billion dollar loss for the fiscal year ended March 31 and is hoping for a big government rescue package.

"Considering that Air India has a long-standing relationship with Boeing we are confident the dialogue will able to move forward to face the current crisis afflicting the global aviation industry," said the Air India spokesman.

Confronted by a sharp downturn in air traffic and overcapacity, it is also seeking to cut overhead costs by rationalising routes and aircraft deliveries.

"There is a lot of excess flab on the entire body of Air India," Civil Aviation Minister Praful Patel said recently.

The Air India spokesman refused to comment on a report in the Hindustan Times that the state-run airline was also claiming 710 million dollars from the US planemaker for failing to deliver the 27 Dreamliner aircraft on time.

"The entire schedule of Air India has gone haywire. We have put (in) a claim of 710 million dollars for their failure to deliver the aircraft to us in time," Air India chairman Arvind Jadhav was quoted as saying by the newspaper.

He alleged that Boeing's failure to deliver the planes had caused large losses for the company, according to the newspaper report.

A spokesman for Boeing declined comment.

The government has asked the beleaguered national carrier Air India to drastically cut costs and manage revenues better if it expects any

financial assistance to stay afloat, while the finance ministry examines the extent of funding required.

"Any assistance from the government would have to be matched by an aggressive cost reduction and a better revenue management," an official statement said Saturday after a committee of secretaries examined options before the government to help the turnaround of National Aviation Co of India that runs Air India.

The carrier is in a financial mess with losses expected to have topped Rs.5,000 crore ($1 billion) last fiscal, forcing Civil Aviation Minister Praful Patel to seek a Rs.10,000-crore (about $2-billion) bailout package for the beleaguered carrier from Prime Minister Manmohan Singh.

"The ministry of petroleum was asked to extend the credit limits to Air India for three months initially," said the statement, referring to the dues of the national carrier to petroleum retailing companies toward aviation turbine fuel.

Air India has also been asked to come up with a concrete cost reduction proposal and replace, among other things, the controversial productivity-linked incentive scheme with another salary pay out plan.

The meeting, chaired by Cabinet Secretary K.M. Chandrasekhar, also reviewed the progress made in Air India's turnaround based on the directions given at a high-powered meeting presided over by Prime Minister Manmohan Singh.

It also went through a detailed presentation on operational efficiency prepared by SBI Caps, the financial restructuring and stock market services arm of State Bank of India (SBI).

Patel had Wednesday said the government cannot help the cash-strapped national carrier "beyond a point" and asked it to change its work culture. He had also promised to recast the board of Air India in a month.

Air India is raising a $1-billion loan from overseas to fund its fleet expansion programme. The 11-year loan is expected to be guaranteed by the US Export-Import Bank.

The committee of secretaries took note of the fleet renewal plans of the airline that was necessary in view of the intense competition it faces in the market.

With Air India considering seeking a compensation of over $700 million from Boeing for delay in delivery of 787s and also planning to cancel delivery of six Boeing 777s, the President of Boeing India, Dr Dinesh Keskar, met with the Chairman and Managing Director of Air India, Mr Arvind Jadhav, in Mumbai on Friday.

Air India had ordered 68 aircraft, including 27 B787s, 23 B777s and 18 B737s, from the US-based manufacturer at an estimated Rs 35,000 crore in 2006. The delivery of the aircraft started in December 2006 with the arrival of the first Boeing 737-800.

A senior airline official, however, said the meeting on Friday was to work out the airline’s fleet requirement keeping in mind the global crisis. Sources indicated that the airline’s viewpoint will emerge only on August 7 when the CMD is scheduled to hold a press briefing here.

Sources also indicated that Boeing will not comment on the matter till Air India has spoken on the issue.

At a recent press conference earlier this month, Dr Keskar said no discussions had yet been held with the airline for payment of compensation or cancellation of aircraft deliveries.

Compensation talk

The issue has been hanging fire since December 2007 when the then Air India Chairman, Mr V. Thulasidas, told Business Line that the airline would seek compensation.

At that time the airline’s officials had indicated that the compensation could be in the form of a cash payment or better delivery schedules.

Analysts pointed out that generally any contract for purchase has financial liabilities on both parties. Sources indicated that the multi-million dollar compensation being sought by the airline is an “opportunity cost”.

Simply put, this is the cost of losing potential revenues the it would have earned by transporting passengers to new destinations in Australia, Europe and Africa had the aircraft been delivered on time. But as the aircraft delivery was delayed, it is a loss for the carrier and the manufacturer is liable to make good the shortfall in expected revenues.

“Air India is unlikely to get any money as compensation. It is possible that given the delay in the 787 delivery and the airline’s decision to invoke the penalty clause, the manufacturer could lower the final selling price by a fixed amount rather than giving any money to the airline,” said a person who has negotiated such contracts for other airlines.

Sources said a final decision on whether to cancel the order or not will be taken by the Air India Board.

The delivery of the B-787s was to start in 2010-11 with five aircraft being acquired during that year and six the following financial year.

Technical problems

The last delivery of the aircraft was to stretch till the second quarter of 2014. But with technical problems delaying the launch of the aircraft, the airline’s plans have been affected.

Cancelling aircraft orders is one of the various options being looked at by Air India to see a reversal in its financial fortunes.

The carrier’s accumulated losses till March 31, 2009, are estimated to be around Rs 7,200 crore.

Meanwhile,Civil aviation minister Praful Patel on Saturday asked private airlines withdraw their proposal to suspend operations Aug 18 and asked

them come to the table for discussions rather than inconvenience passengers.

"The government understands the difficulties being faced by aviation sector. However, the government does not support any move that will inconvenience the travelling public of the country," Patel said in a statement.

"We advise the airlines to engage in a dialogue with the government," he said, while warning that the Directorate General of Civil Aviation, the sector's regulator, will be asked to take strict action if the airlines did not withdraw their threat.

The decision to suspend operations, taken at a meeting in Mumbai of the Federation of Indian Airlines (FIA) on Friday, the representative body of private carriers in the country, has also been criticised by air travellers, who said this kind of threat should be dealt with severely.

"These people are in the service sector. They earn their bread and butter from us. How can they take such a decision that has no concern for passengers? There are ways to protest -- but certainly not this way," said Mohan Parthasarathy, an executive based here and a frequent traveller.

The civil aviation minister said state-run Air India, which is not a member of the federation, will mount additional services Aug 18 so to reduce the inconvenience of passengers.

"The issue of tax on aviation turbine fuel is a state issue and the aviation ministry has been requesting the states for the past few years to see reason," he said, referring to one of the demands of private carriers for a cut in jet fuel prices.

"The other issues primarily relate to the slowdown in the economy, global and domestic, and the impact of high prices of aviation turbine fuel in 2008-09," the minister said.

Apart from a cut in sales tax on fuel, the private carriers have asked the government to direct oil retailers to sell aviation jet fuel cheaper and reduce the airport charges which they say have ballooned ever since private players were allowed into the field.

"Aviation fuel prices in India are among the highest in the world," said Anil Baijal, secretary general of the federation, adding this alone accounted for 30-40 percent of an airline's operational costs.

The private carriers owe nearly $500 million towards fuel to oil companies. Baijal said that the accumulated losses of private carriers amounted to nearly $2 billion.

Thus far, the civil aviation ministry has ruled out any bailout package for the aviation industry, even though moves are afoot to help the national carrier tide over one of its worst crises.

The opposition parties, including the Left front and the Bharatiya Janata Party (BJP), have also said that a bailout package from the government would not be desirable.

Private airlines threaten to suspend flights on Aug. 18

Special Correspondent

Mumbai: Private airlines have threatened to suspend operations on August 18 if the government did not come out with a bailout package for them.

The airlines, under the aegis of the Federation of Indian Airlines (FIA), said total losses for the private aviation sector was expected to be Rs. 10,000 crore in 2008-09. The aviation turbine fuel (ATF) taxes were unviable as the estimated airline levies stood at $250 million.

They said if the government did not cut fuel cost and other levies, it would be compelled to call off domestic operations for an indefinite period. However, international operations would not be affected.

At a press conference organised by the FIA, both Vijay Mallya, Chairman, Kingfisher Airlines and Naresh Goyal, Chairman, Jet Airways, expressed their disillusionment with the government for not coming to their rescue.

FIA Secretary General Anil Baijal said member airlines had accumulated losses totalling $2 billion, and unless the government initiated action to help them overcome the crisis they would not be able to sustain operations any further.

According to Mr. Mallya, the private airlines would refund the money for the bookings made for August 18.

Mr. Goyal said this was not an ultimatum to the government but only a way of drawing its attention to the plight of the industry.

http://www.hindu.com/2009/08/01/stories/2009080150010100.htm

Airlines

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Bangalore airport invites bids for apron expansion (July 29, 2009)
Delhi airport modernisation: Gearing up for Games traffic (July 27, 2009)
AAI to integrate domestic cargo terminals at Kolkata airport (July 25, 2009)
AI to delay payment of incentives (July 24, 2009)
Alliance Air contract staff may be made permanent (July 23, 2009)
Air India facing crew shortage on certain routes (July 22, 2009)
BIAL to resume second phase expansion next year (July 20, 2009)
Jet Airways director resigns (July 17, 2009)
Jet, Sahara say no to out-of-court settlement (July 17, 2009)
AI likely to call back overseas regional heads (July 14, 2009)
Turning around Air India (July 13, 2009)
Govts and business (July 13, 2009)
Jet Air to lay off 43 trainee technicians (July 11, 2009)
Abolition of FBT to help aviation sector save crores (July 08, 2009)
AI to pay June salary on July 10, 14 (July 08, 2009)
Disappointed (July 07, 2009)
Enhance allocation to defence (July 05, 2009)
AI employees hope salaries will be paid today (July 03, 2009)
New ground handling policy pushed back 6 months (July 01, 2009)
AS 9100 certification awarded to BATL (June 29, 2009)
‘Airport regulatory body to be operational in 2-3 weeks’ (June 29, 2009)
Y.S. Bhave appointed AERA Chairperson (June 27, 2009)
AI offers leave without pay to cut wage bill (June 27, 2009)
AI management, unions form panel to cut costs (June 26, 2009)
AI support (June 25, 2009)
AirAsia plans to increase India footprint (June 25, 2009)
HAL forms unified helicopter complex to cater to growing business (June 24, 2009)
ABB bags Kolkata airport order (June 23, 2009)
Put to productive use (June 22, 2009)
Jet Airways India (Rs 238.50): Sell (June 18, 2009)
Air India unions protest move to delay salaries (June 16, 2009)
US co wins airport deal for passenger IT services at Delhi (June 13, 2009)
Maytas to take up Shimoga, Gulbarga airport work (June 10, 2009)
GMR Group not interested in small airport projects now (June 08, 2009)
Disaster waiting to happen (June 04, 2009)
HAL to develop Nashik airport (May 31, 2009)
Chennai airport expansion (May 29, 2009)
New CEO for GHIAL (May 28, 2009)
SpiceJet bucks the trend, to hire 500 this fiscal (May 28, 2009)
National Aviation Co plans to recast key committees (May 21, 2009)
Jet Airways to continue with 15-day roster for cabin crew (May 16, 2009)
Mumbai Intl airport ties up with Travel Food Services (May 14, 2009)
Consolidated Const bags order (May 14, 2009)
MIAL estimates Rs 2,500-cr capital expenditure in FY10 (May 06, 2009)
MASholidays opts for IBS software (May 02, 2009)
Arvind Jadhav is new CMD of Air India (May 01, 2009)
Airports employees defer strike (May 01, 2009)
Bharat Bhushan takes over as NACIL’s interim chief (April 28, 2009)
‘We are on course to putting Paramount on national map’ (April 27, 2009)
Air Works gets Kingfisher contract (April 22, 2009)
VVIPs can fly in greater comfort soon (April 21, 2009)
Delhi airport (April 20, 2009)
‘Focus will be on harnessing revenue from various streams’ (April 20, 2009)
Symposium on aviation industry (April 18, 2009)
UB Holdings seeks nod for corporate guarantee (April 18, 2009)
Travel biz sees surge in demand for IPL 2 (April 17, 2009)
Disabled-friendly airports (April 07, 2009)
Special tour packages for IPL (April 05, 2009)
Routes Asia to discuss economic woes (March 29, 2009)
New Vizag airport terminal becomes operational (March 28, 2009)
Jet Airways India (Rs 160.60): Sell (March 23, 2009)
Hunter Douglas wins Delhi airport order (March 22, 2009)
BJETS in pact with Global Vectra Helicorp (March 21, 2009)
Turkish airline hires from Frankfinn (March 21, 2009)
Blue Star bags airport order (March 11, 2009)
Airlines hit (March 10, 2009)
‘Tap opportunities in aircraft, aerospace sectors’ (February 27, 2009)
Vizag airport terminal inaugurated (February 22, 2009)
‘Fares may be cut if aviation fuel gets declared goods status’ (February 21, 2009)
Jet Air, Malaysia Air sign code sharing pact (February 20, 2009)
Fewer tourists, more sops (February 19, 2009)
Jet Airways Group CEO resigns (February 19, 2009)
Ramco solution for Yemen Airways (February 18, 2009)
NACIL to form four jt venture cos with Singapore firm (February 18, 2009)
‘We have an aggressive growth strategy’ (February 16, 2009)
Railway fare cut weakens aviation stocks (February 14, 2009)
Tata, Agusta sign MoU for copter venture (February 14, 2009)
Levying user fee (February 12, 2009)
Defence spends won’t be cut: Antony (February 12, 2009)
Telecom, retail, aviation to gain from FDI policy (February 12, 2009)
‘Boeing will compensate for delays’ (February 11, 2009)
BAE Systems to unveil Mantis (February 11, 2009)
Honeywell to bid for IAF’s Jaguar upgrades (February 11, 2009)
BEL, Boeing to set up analysis centre (February 11, 2009)
Boeing’s IDC products for armed forces (February 11, 2009)
HAL’s ex-chief heads new Maini aerospace co (February 10, 2009)
New international terminal at Thiruvananthapuram by May (February 09, 2009)
New international terminal at Thiruvananthapuram by May (February 09, 2009)
Cabinet Secy reviews airport security (February 09, 2009)
Cabinet Secy reviews airport security (February 09, 2009)
Aero India draws fighters, biz jets, military tech (February 07, 2009)
Maharashtra plans airports at Amravati, Gadchiroli (February 05, 2009)
Cash and carry (February 02, 2009)
‘Govt must build aviation infrastructure’ (January 26, 2009)
IATA looks at ‘one-stop security’ (January 12, 2009)
Rising crude price grounds aviation stocks (January 06, 2009)
Upgrade of airports to boost export draws flak from CAG (January 05, 2009)
IndiGo’s Re 1 and Rs 99 fares (January 03, 2009)
Airport regulatory body by March (January 03, 2009)
Jet announces New Year offers (January 03, 2009)
New MD at HAL Lucknow (January 02, 2009)

Corporate Results

Kingfisher Airlines’ Q1 loss widens (July 30, 2009)
SpiceJet posts Rs 26 cr net profit (July 29, 2009)
Jet Air incurs Rs 225-cr net loss in first quarter (July 25, 2009)
SpiceJet posts Rs 7.8-cr net loss (June 28, 2009)
Jet Air posts Rs 53-cr profit in Q4 (May 26, 2009)
CIAL posts Rs 60-cr profit (April 24, 2009)
HAL pre-tax profit rises 22% (April 04, 2009)
SpiceJet reports net loss of Rs 17.96 cr in Q3 (February 03, 2009)
Jet Airways loss doubles on high fuel costs, lower loads (January 17, 2009)

Home Page

Foreign pilots replacement deadline looms over airlines (August 01, 2009)
Turbulence in air as pvt airlines plan to suspend services on Aug 18 (August 01, 2009)
AI may seek $700 m reparation from Boeing for delivery delay (August 01, 2009)
Jet, Kingfisher bet on global routes for forex, fuel cost advantage (July 29, 2009)
Finance Ministry to work on quantum of funds for AI (July 26, 2009)
Jet Air incurs Rs 225-cr net loss in first quarter (July 25, 2009)
No talks on deferring aircraft delivery, says Boeing (July 23, 2009)
Offers to help AI pouring in, but with a rider (July 20, 2009)
International advisory board to help AI chart a new course (July 10, 2009)
Air India plans to search globally for a COO (July 08, 2009)
Air India turnaround panel gets cracking (July 06, 2009)
Air India joins club seeking Govt support (June 29, 2009)
Govt set to bail out Air India (June 25, 2009)
AI targets Rs 500-cr wage cost reduction (June 23, 2009)
Govt help could come with strings attached: AI chief (June 21, 2009)
Paramount to buy 10 Airbus A-321 (June 20, 2009)
Forego salary, perks for July, AI executives told (June 20, 2009)
Online air travel bookings fall post fuel surcharge hike (June 19, 2009)
Jet takes off on the low-cost, no-frills route (June 18, 2009)
Air India losing Rs 14-15 cr a day (June 17, 2009)
Air India to delay salary payment (June 15, 2009)
KPMG likely to determine airport user fee (June 14, 2009)
Tatas, Sikorsky join hands to make chopper cabins (June 13, 2009)
‘Connectivity with hospitality is key’ (June 08, 2009)
Airport ground handling policy not cleared for take-off yet (June 04, 2009)
Govt to consider initial public offer for Air India (June 02, 2009)
Global airlines woo travellers with bargain fares (May 23, 2009)
Paramount to allow mobile use (May 21, 2009)
Jet employees being laid off in phases (May 15, 2009)
Kingfisher Red to operate some routes of Kingfisher (May 09, 2009)
Jet Air issues pink slips to 100 employees (May 02, 2009)
Delhi handles more air passengers than Mumbai (April 26, 2009)
20 Kingfisher pilots quit (April 22, 2009)
Serving food on planes, a serious biz indeed (April 20, 2009)
Jet asks some operations staff to relocate (April 17, 2009)
Service in sky may be 5-star, but on ground, it’s different (April 13, 2009)
Poll bonanza awaits Air India (April 07, 2009)
Sahara India takes Jet Airways to court again (April 01, 2009)
Mallya meets SBI top brass, seeks credit line for Kingfisher Airlines (March 28, 2009)
‘Asian airlines to be worst hit by slowdown’ (March 25, 2009)
Kingfisher in talks with GVK for repayment of dues (March 19, 2009)
February halts airlines’ descent (March 14, 2009)
Shortage of aircraft could affect election tours (March 04, 2009)
NACIL, Singapore co venture gets Cabinet nod (February 24, 2009)
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Domestic air traffic declines in Jan (February 17, 2009)
HAL gets back 450 of its former employees (February 13, 2009)
Airlines told to give fare break-up on Web sites (February 13, 2009)
The show is getting bigger and better (February 11, 2009)
Delhi airport to levy development fee on passengers from March 1 (February 10, 2009)
Airline Web sites offer the best bet in fares (February 07, 2009)
Star Aviation to take off in April, cover tier-II cities in South (February 05, 2009)
No fuel on credit for Kingfisher Airlines, only ‘cash & carry’ (January 30, 2009)
Proposal to allow 49% stake for foreign airlines in domestic carriers (January 21, 2009)
Airlines up on FDI hopes (January 20, 2009)
Paramount Airways’ promoters keen to hike stake to 100% (January 19, 2009)
Govt may allow foreign airlines to take minority stake in domestic carriers (January 14, 2009)

Logistics

Opinion

VIPs and security checks (July 24, 2009)
Shortcomings in aviation (July 21, 2009)
How do you solve a problem like Air India? (July 11, 2009)
Turning around Air India (July 10, 2009)
Air India needs support (June 23, 2009)
Saving a dying airline (June 23, 2009)
The Atlantic crash mystery (June 10, 2009)
Sahar surprises (April 15, 2009)
Confused aviation? (March 31, 2009)
Smooth flight, rough landing (March 13, 2009)
An unfair tax on fliers (March 06, 2009)
Cleaning up the aviation mess (February 11, 2009)
Partners in aerospace (February 09, 2009)
Partners in aerospace (February 09, 2009)
Aviation ‘spirit’-ualism (January 06, 2009)

Web Extras

Air India to pay salaries to 11,000 staff on July 3 (June 30, 2009)
‘Aerospace park could be a win-win situation’ (June 22, 2009)
AAI told to step up surveillance (April 30, 2009)
Boeing sets up research centre in Bangalore (April 01, 2009)
Airport development fee at Delhi on the cards (January 14, 2009)

Come for talks, private airlines told

Special Correspondent

— Photo: Paul Noronha

Captains of private airlines on Friday said they would suspend their domestic services on August 18 to press for a bailout package for the sector and to protest the “high prices of jet fuel and airport charge. From left are Rahul Bhatia, Chairman, Indigo Airlines; Naresh Goyal, Chairman, Jet Airways; Anil Baijal, Secretary-General, Federation of Indian Airlines; and Vijay Mallya, Chairman, Kingfisher, at a press conference in Mumbai on Friday.

NEW DELHI: As private airlines decided to go on strike on August 18 in protest against high rate of taxes on Aviation Turbine Fuel (ATF) and airport taxes, the government on Friday suggested to them to engage in a dialogue with it instead of putting air travellers to inconvenience.

Civil Aviation Minister Praful Patel, who is on a trip abroad, said the government understood the problems being faced by the aviation sector but reiterated that the “government does not support any move that will inconvenience the travelling public of the country.”

“We advise the airlines to engage in a dialogue with the government. The issue of tax on ATF is a State issue and the Aviation Ministry has been requesting the States for the last few years to see reason,” Mr. Patel said in a statement. “The other issues relate primarily to the economy and impact of high ATF prices in 2008-09. Air India will not participate in this decision of select private airlines and will mount additional services on August 18 so as to reduce any inconvenience to the public,” the Minister said.

Taking note of the crisis in the aviation sector, Finance Minister Pranab Mukherjee said that he would discuss the matter with Mr. Patel.

Cash-strapped

Cash-strapped Air India is mulling cancelling delivery of six Boeing 777 long-haul aircraft. Air India Chairman and Managing Director Arvind Jadhav and Boeing India President Dinesh Keskar held a meeting in Mumbai on Friday to discuss the matter.

“Air India is in dialogue with Boeing for cancellation of six B-777 aircraft deliveries in 2010-11 and 2011-12 in view of the current global aviation scenario,” a spokesperson of the State-run airline said.

The national flag carrier had ordered 68 aircraft from Boeing at a total cost of nearly Rs. 50,000 crore to augment and renew its ageing fleet. Air India has also been asked by the government to draw up financial and manpower restructuring plans to cut down losses. In another development having direct impact on the aviation sector, State-run oil firms on Friday increased jet fuel prices marginally by 1.6 per cent on the back of rising international oil rates.

Aviation turbine fuel rates in Delhi were increased by Rs.585 per kilolitre to Rs.36,923 per kl, effective from Friday midnight. The increase follows a 5.7 per cent cut in jet fuel prices two weeks ago.

http://www.hindu.com/2009/08/01/stories/2009080161181300.htm

July 29, 2009

Don't tax common man to bail out Air India

When Continental Airlines asked Shri A P J Abdul Kalam [ Images ], our former President, to undergo a security check, Parliament -- the VIP class at large in fact -- was up in arms. (The only VIP that did not seem to mind was the former head of state himself.) I wish there would be an equal uproar about the genuine scandal in the skies, namely Air
India and its doings.

[Strictly speaking, I suppose we should be talking about 'NACIL', the 'National Aviation Company of India Limited', rather than 'Air India [ Images ]'. The holding company was created by the Government of India to merge Air India, Indian Airlines, and Alliance Air. However, everyone calls it 'Air India' since that is what the new outfit will be called
ultimately.]

Air India is bleeding money at a rate of close to Rs 15 crore every single day. As of March 2009, when the last financial year closed, Air India's losses amounted to a breathtaking Rs 7,200 crore.

As part of its 'restructuring', Air India has submitted a list of goodies it would like from that Santa Claus [ Images ] known as the Government of India. It wants the Union petroleum ministry to give it more time to pay its bills, 'initially' for three months. It wants Rs 10,000 crore of taxpayers' money as 'equity.'And it wants a further Rs 10,000 crore as a 'soft loan.'

Let us cut through all this gibberish. The simple fact is that Air India, having run up losses of Rs 7,200 crore and adding about Rs 15 crore worth of red ink every twenty-four hours, is now asking for even more money to burn from the Government of India.

What Air India has not done is to specify how and in which areas it can cut losses. Is it cutting salaries? Is it laying off staff? Has it identified the routes where it is making losses, and if so what does it propose to do about them? Who are the managers, if any, whose heads are about to roll?

I have said that Air India is asking for money from the Government of India. It would be more accurate to say that it is asking to take money from the pockets of the man on the street as the Government of India has no surplus into which it can dip.

Frankly, it is utterly senseless to spend the taxpayers' money on Air India. Is civil aviation truly an area where a resource-strapped government should be directing money?

How many Indians actually use airlines to travel? According to the Director General of Civil Aviation, all the domestic airlines -- not just Air India but the private carriers -- flew 40.77 million passengers in 2008. That is a smaller figure than in 2007 when they flew 42.85 million.

Those may sound impressive but they are a drop in the bucket compared to the immensity of India at large. Even if you take the figure from 2007, that 42.85 million is actually 4.285 crore when you use the familiar Indian system of counting. And India is a nation of over one hundred crore people.

Even if you assume that none of those 4.285 crore passengers flew more than once and that none of them was a foreigner, that still leaves over 95 per cent of India which does not use the air as a means of transport.

What is the common man's chosen means of transport? In India's commercial capital of Mumbai [ Images ] the BEST buses carry 4.5 million passengers every day -- and that is just one city. Indian Railways, which serves all of India, carries 18 million passengers every day.

These are statistics that simply dwarf those of the airlines.

Does the Government of India think that it has money burning in its pockets? If so, why not spend it on improving rail and road transport, the common man's means of travel, rather than on civil aviation, which is a mode open only to the upper class and the upper-middle class.

I would like to point out too that the 42.85 million (or the 4.285 crore) passengers who chose to fly did not all use Air India. In fact, it is a certainty that most of them were using one of the other airlines.

In 2008 the private airlines accounted for 85.1 per cent of all domestic traffic according to the Director General of Civil Aviation. The figures for 2009 are still coming in but the best that NACIL (Air India) could manage in the first six months was 17.4 per cent in April, after which its share started to drop once again.

Let me recap the situation as I see it. Air India wants the taxpayer to give it at least Rs 20,000 crore -- as 'equity' or as a 'soft loan' -- even though it carries less than one fifth of the total number of air passengers, and despite the fact that 95 per cent of Indians simply do not fly at all. At a time when the Government of India is getting ready to run up huge deficits is this the best use of taxpayer money?

And if transport is indeed a priority, spend it on roads and railways, not on civil aviation when the majority of India has simply not seen the interior of a plane. Don't tax the common man to pay for the upper classes' comfort.

T V R Shenoy

http://business.rediff.com/column/2009/jul/29/do-not-tax-common-man-to-bail-out-air-india.htm

Jet’s service tax liability Rs260 cr over 5 yrs: govt

Jet Airways has also not paid interest on late payment of service tax on several occasions

Mumbai: A service tax audit report on Jet Airways (India) Ltd, the country’s second largest carrier by passengers flown, says that the airline owes about Rs260 crore, including interest, to the service tax department for the five fiscal years between 2003-04 and 2007-08, two officials of the department said. The service tax agency carried out an audit of the Mumbai-based carrier in March. Such audits are conducted by the department to improve compliance with service tax norms and to detect any instances of tax evasion.

The service tax department has asked it to pay the service tax of Rs247.47 crore for the period 2005-06 to 2007-08 along with the interest. Ahmed Raza Khan/Mint

“Jet Airways has received a show cause notice from the service tax department demanding service tax on various foreign exchange related expenses, which is based on import of services rules,” a Jet Airways spokesperson said in an email response to a Mint questionnaire.

“This matter has been referred to our lawyers and they are in the process of drafting an appropriate response. We have sought time till September 2009 to submit our response,” the spokesperson added. “After due consultations and consideration of various case laws, we are confident that a substantial portion of this demand would be set aside (or not be applicable) and liabilities if at all any, would be very negligible.”

A show-cause notice is not an indictment, but only seeks an explanation from a company, typically within a month.

The audit report was reviewed by Mint. It will be acted upon by various divisions of the service tax department, depending on the jurisdiction.

Jet Airways’ executive director Saroj K. Datta said he “is not aware about any such report”. The two service department officials didn’t want to be named. “This is the first ever audit of Jet Airways,” one of them said.

According to the audit report, the airline has not paid service tax on import of services for the past three years. The service tax department has asked it to “pay the service tax of Rs247.47 crore for the period 2005-06 to 2007-08 along with the interest”.

The audit report has also listed a service tax liability of about Rs11 crore under several categories of service such as collection of excess baggage charges, air cargo service and non-scheduled flights for transportation of passengers embarking on an international journey, among others, over the past five years.

Jet Airways has also not paid interest on late payment of service tax on several occasions.

“During the course of the audit, it was observed that the assessee had delayed the payment of service tax on many occasions. In some cases, they have paid the interest on delayed payment, whereas, in other cases they have not paid the interest on delayed payment. These delayed payments includes payments through Cenvat (Central value-added tax) account also,” the report said.

According to the report, Jet Airways has violated Cenvat credit norms. Airline operators pay service tax to vendors for services such as maintenance of aircraft. To avoid double taxation, the government permits airline firms to avail what is known as Cenvat credit.

Airlines operators are entitled to claim Cenvat credit for service tax incurred for procuring goods and services that are extended to customers, who are charged for it.

Under service tax regulations, a service provider who does not maintain separate accounts for taxable and non-taxable services can get only 20% of the Cenvat credit, but those who maintain separate accounts can get 100% credit.

The audit report said Jet Airways had wrongly availed Cenvat credit for three fiscal years between 2005 and 2007.

“While scrutinizing (a) few input service invoices, which were made available to the audit after several request, it was observed that the input service credit taken and utilized…do not have proximity or nexus with output services,” the report said.

With corporate traffic slowing and ticket yields coming under pressure, Jet Airways last week reported a Rs225.31 crore loss for the quarter ended June, against a net profit of Rs143.38 crore for the corresponding period last fiscal.

Sales in the latest quarter slumped by 26.35% to Rs2,085.04 crore, from Rs2,830.82 crore in the June quarter a year ago.

On Wednesday, Jet Airways shares rose 1.57% on the Bombay Stock Exchange to close at Rs253.10. The benchmark index, the Sensex, fell 1.03% to 15,173.46 points.

http://www.livemint.com/2009/07/30000351/Jet8217s-service-tax-liabil.html?d=1

Lower fuel prices help SpiceJet log Rs26 cr profit in first quarter

It spent Rs182.81 crore in the quarter on aircraft fuel, its biggest expense, or nearly half of Rs310.2 crore a year ago

Tarun Shukla

font size

New Delhi: Discount airliner SpiceJet Ltd, which is backed by billionaire investor Wilbur Ross, on Monday said it has made a profit of Rs26.34 crore for the three months ended 30 June, compared with a loss of Rs129.22 crore in the same period last year, mainly because of lower fuel costs.

It spent Rs182.81 crore in the quarter on aircraft fuel, its biggest expense, or nearly half of Rs310.2 crore a year ago.

“In the current environment, it’s an amazing result,” chief executive Sanjay Aggarwal told Mint.

“It’s a sign that the LCC (low-cost carrier) model has proved itself,” said Kapil Kaul, India chief executive for aviation consultancy firm Centre for Asia Pacific Aviation.

SpiceJet’s revenue for the first quarter rose to Rs634.41 crore from Rs483.40 crore in the year-ago period. SpiceJet, which won a total of $100 million in funding from Ross and Goldman Sachs last year, grew its operations in the fiscal ended 31 March to 19 Boeing aircraft and 125 daily flights from 15 Boeing aircraft and 94 daily flights in the preceding fiscal.

The airline has also formed an ethics committee to bring in greater transparency in its future contracts, said Ajay Singh, a director on the carrier’s board. The decision came after shareholders raised questions in the manner in which the firm was planning to award an aircraft maintenance contract.

Spicejet, which has 12.4% of the air passenger market in June, according to data released by the civil aviation ministry, has been posting losses for the past two years in the June quarter.

Aggarwal, however, said airfare per passenger continued to be under pressure and were lower this quarter compared with a year ago.

Kaul said SpiceJet’s profits may not be sustainable in the ongoing quarter considering the weak demand. “They have a profit this quarter, they will loose in the next quarter and by third quarter, everyone will be an LCC,” Kaul said referring to increased competition from full-service carriers such as Jet Airways (India) Ltd and Kingfisher Airlines Ltd, which have converted almost two-thirds of their flights to low-cost flights.

“With everyone turning LCC, it will surely have an impact on SpiceJet. We will have to see how it goes,” Kaul said.

Last week Jet Airways, India’s largest airline firm by market value, announced a Rs225.31 crore loss for the June quarter, compared with a net profit of Rs143.38 crore a year ago. Kingfisher Airlines is yet to announce its results for the quarter.

SpiceJet’s shares rose 1.33% at the Bombay Stock Exchange to Rs19.05 on Monday. The benchmark Sensex index fell 0.03% to 15,375.04 points.

http://www.livemint.com/2009/07/27224920/Lower-fuel-prices-help-SpiceJe.html?d=1

Global indices' movement indicates rising convergence

27 Jul 2009, 0551 hrs IST, Karan Sehgal & Devangi Joshi , ET Bureau

It’s a known fact that all kinds of asset markets move in tandem. The correlation is even stronger when we talk about equity markets. And, when we

More Pictures

speak of equity indices, the most widely tracked index is Dow Jones Industrial Average (commonly known as ‘Dow’ ). Experts often use correlations between Dow and Nifty to analyze the future course of action. And the history shows that they are right in doing so.

For instance, both Dow and Nifty made a high on May 12, 2006. This was followed by a correction in Nifty and a low on June 16, 2006. This was soon followed by a correction in Dow and the index reached its low on July 21, 2006. However, this wasn’t going to be the case in the next two years of stock market history, as Dow went on to be the leading indicator of all highs and lows of Nifty.

Post July 2008, Dow could not preempt Nifty’s highs and lows. From October 2008 to first week of March 2009, Nifty was in consolidation phase and it went nowhere. However, Dow witnessed sharper moves, as it made a low on November 21, 2008 only to make a new bottom on March 06, 2009.

Obviously, the correlation between Dow and Nifty was very low between October’ 08 to March’ 09 as it stood at only 0.47. The value of correlation can be anything from –1 to +1. On the positive side, it shows that both the series move up and down together, on the negative side, it shows that they move in opposite directions. Since 2003, in nine out of thirteen six months periods, the correlation was more than 0.6. Sometimes, the correlation was as high as 0.9.

Interestingly, the correlation between Dow and Nifty has reached 0.9 since first week of March’ 09 - when the current rally had started in India. It indicates ‘decoupling’ has very little value on ground. There will be instances when correlation weakens and Dow may not be able to preempt Nifty’s moves. But later or sooner that trend will be reaffirmed. For instance, both Nifty and Dow made a high on June 12, 2009.

Another interesting observation is that since, March 2009, Nifty has had a very strong negative correlation (-0 .93) with dollar index. The dollar index is a measure of US dollar’s strength against a basket of currencies namely, euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. It basically shows the strength of the US currency. Nifty’s correlation with dollar index has remained in the range of -0.20 to-0.5. So, does this show that we are in an unstable state as of now? The answer is no.

This is because dollar had appreciated sharply in the last months of 2008. Due to fear psychosis, people started buying dollars despite of weakening US economy. That had to be corrected. The fact that dollar had a negative correlation with Nifty shows that while Nifty rose sharply, dollar depreciated sharply. This shows that a semblance of normalcy is returning.

In the current rally, Nifty has shown very high correlation with other emerging market indices . Nifty had a correlation of 0.95 with BOVESPA (Brazilian index), 0.92 with RTS (Russian index) and 0.81 with Shanghai SE. Again all emerging market indices are moving strongly in one direction.

Conclusion

It seems that fear has gone away from investor’s mind, as emerging markets are again rising. The dollar is depreciating due to weakness in US economy. And again Dow is having strong correlation with Nifty. It shows that the days of uncertainty, when global indices and currencies moved in unchartered territory, are fading in public’s memory. For short term, it is far more important to spot correlations much like earlier.
http://economictimes.indiatimes.com/Decoupling-has-turned-out-to-be-a-myth/articleshow/4823974.cms

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Panel pill for AI turnaround

OUR SPECIAL CORRESPONDENT

Troubled times

New Delhi, July 25: A committee of secretaries today asked the finance ministry to bail out Air India by infusing fresh capital and extending soft loans.

It has also asked the petroleum ministry to give the beleaguered airline, which has suffered more than Rs 7,200 crore in accumulated losses, at least three more months to pay up its jet fuel dues.

The committee, headed by the cabinet secretary, has indicated that Air India need not pay interest on past unpaid jet fuel bills during this period.

The airline has also been asked to restructure incentive pay-outs to employees to cut down on its wage bill, discontinue non-viable overseas routes, leverage real estate holdings and delay aircraft purchases to reduce costs.

The airline has also been asked to hire a cost audit firm to help it keep tabs on its costing.

These decisions were taken after the airline and its merchant banker SBI Caps made a presentation before the high-level committee headed by the cabinet secretary.

The committee was set up to look into the financial mess the state-run carrier had landed itself in.

SBI Caps has chalked out a turnaround plan aimed at generating Rs 3,000 crore through internal accruals over the next six months. The plan also includes steps to mobilise additional revenue of Rs 1,800 crore by cutting costs and through savings.

Officials said the finance ministry had been asked to critically examine the financial assistance it can give to Air India. The airline, which has suffered over Rs 5,000 crore in losses during 2008-09, has been seeking an equity infusion of about Rs 1,250 crore and soft loans of nearly Rs 3,000 crore from the government.

Air India chief Arvind Jadhav told reporters after the meeting, “The government is with the airline and would give full backing on its growth and cost-saving plans.” The airline would keep the committee updated on these plans at its meetings to be held every month from now, Jadhav added.

Sources in the civil aviation ministry said the airline had been asked to defer plane purchases to save on cash outgos and interest pay-outs. Aircraft purchase will now be staggered till 2015-16, instead of being completed by 2011-12. Air India has till date inducted 51 planes out of an order of 111 Boeing and Airbus aircraft.

The airline has already taken loans of over Rs 16,000 crore from some 15 banks to pay for the fleet purchase. Servicing this loan has turned out to be a major liability for the airline.

Rail cell on track

OUR SPECIAL CORRESPONDENT

New Delhi, July 25: Railway minister Mamata Banerjee today notified the Amit Mitra Expert Committee on funding railway projects through public-private partnership.

Other members are D. Bandyopadhyay, former rural development secretary, Tamara Capital chairman Udayan Bose, Nasscom co-founder Saurav Shrivastava, Rail Board chairman S.S. Khurana and Abdul Kalam, former CMD of Eastern Coalfields.

The committee has been especially asked to develop business models for the Delhi-Mumbai industrial corridor and for the railway land bank along the eastern dedicated fright corridor.

http://www.telegraphindia.com/1090726/jsp/business/story_11283555.jsp

ICICI Bank net soars on treasury deals

OUR SPECIAL CORRESPONDENT

Mumbai, July 25: ICICI Bank, the country’s second largest commercial bank, reported a 21 per cent growth in net profit at Rs 878 crore in the first quarter ended June 30 on the back of strong treasury income. In the same quarter last year, the bank had earned a net profit of Rs 728 crore.

Analysts had estimated the largest private sector bank to report a net profit of around Rs 760 crore during the period.

Treasury income — arising mainly from dealing in government bonds — underpinned the solid performance during the first quarter.

The bank reported a treasury income of Rs 714 crore against a loss of Rs 594 crore in the corresponding period last year.

The strong treasury income offset the 5 per cent decline in the bank’s net interest income (NII) which represents a bank’s core operations.

NII of the bank came down to Rs 1,985 crore compared with Rs 2,090 crore in the same period last year. However, non-interest income grew to Rs 2,090 crore (Rs 1,538 crore), mainly led by treasury income. Fee income also dipped to Rs 1,319 crore from Rs 1,958 crore in the year-ago period.

ICICI Bank said the lower level of fee income was because of reduced investment and merger and acquisition activity in the corporate sector and lower level of fees from the distribution of retail financial products, reflecting the continued impact of the adverse global economic conditions on the operating environment.

Over the past few months, ICICI Bank has refrained from growing its balance sheet aggressively by sharply reducing the focus on non-collateralised loans with a view to containing risks in a challenging environment. The loan book of the bank shrank to Rs 198,102 crore on June 30, 2009, from Rs 224,146 crore on the same day last year.

Eveready profit

Dry cell battery major Eveready Industries India has reported a net profit of Rs 16 crore in the first quarter of 2009-10 against Rs 3 crore in the corresponding quarter last year. Net sales were up at Rs 232 crore compared with Rs 219 crore a year ago.

http://www.telegraphindia.com/1090726/jsp/business/story_11283552.jsp

AI to revise incentives

OUR CORRESPONDENT

New Delhi, July 23: Air India has decided to revise its much criticised productivity-linked incentive scheme.

The ailing carrier will pay the July base salary in time but has deferred the payment of productivity-linked incentives to its employees for July till August 20.

An internal airline circular said: “As regards the PLI (productivity-linked incentives) to be paid in July the norms for the company as a whole have to be reviewed and parameters need to be revised. Therefore, payments need to be held till August 20.”

Productivity-linked incentives account for over 45 per cent of the company’s wage bill.

According to sources, “At the moment, the PLI in many cases is huge, sometimes many times more than the salary and is not always related to performance. We need to restructure the PLI and save costs and make it directly related to performance.”

For instance, technicians get a salary of around Rs 50,000 per month and a monthly PLI of Rs 1.3 lakh.

At a lower level, the PLI makes up 20-30 per cent of the salary. A superintendent with a salary of around Rs 25,000 a month gets a monthly PLI of Rs 9,000-10,000.

The state-owned airline has suffered losses of over Rs 5,000 crore during the last fiscal and the management has been given 30 days to come up with a viable revival plan. SBI Caps has been appointed by the government to prepare a growth plan for the cash-strapped company.

The airline plans to reduce its manpower cost to the tune of Rs 500 crore per annum by re-examining the wage agreements with various employee unions.

http://www.telegraphindia.com/1090724/jsp/business/story_11276198.jsp

AI may seek $700 m reparation from Boeing for delivery delay
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http://www.thehindubusinessline.com/2009/08/01/index.htm
NEW DELHI: Cash-strapped Air India-Indian Airlines has sought an immediate loan of about Rs 10,000 crore from the government along with an annual

equity infusion of Rs 2,500-3,000 crore for the next four to five years, which will be linked to the induction of new aircraft into its fleet, sources said.

In all, the tottering airline on Saturday projected a requirement of almost Rs 20,000 crore, roughly the size of Delhi state's annual budget, over the next five years.

The assistance was sought during a presentation to the committee of secretaries (CoS), which is headed by cabinet secretary K M Chandrasekhar. The finance ministry has now been asked to determine the extent of help AI should get, once it prepares a detailed plan, to be reviewed by the CoS in a month's time.

For the national carrier, the spiral dive began in 2006-07. Air India made a loss of Rs 541 crore and Indian Airline's loss was Rs 230 crore. In about 700 days, from March 31, 2007 to March 31, 2009 — during which the airlines merged — the losses rocketed to a mind-boggling Rs 7,200 crore.

Government on Tuesday said that national carrier Air India is estimated to suffer a loss of around Rs 5,000 crores in 2008-09 due to

operating losses, high oil prices and debt servicing.

"National Aviation Company India Ltd (NACIL) expects to register a loss of approximately Rs 5000 crores in 2008-09," minister of state for civil aviation Praful Patel said in a written reply to a question in Rajya Sabha.

"The losses have been largely due to operating losses, which have been compounded due to the present economic recession as also the high oil prices last year and debt servicing on new aircraft," he said.

The minister said NACIL has initiated steps like integration and restructuring of network and schedules, fuel efficiency improvement measures and extended credit period for all vendors.

It has also put on hold promotions and recruitments. The staff has been asked to travel only economy class apart from measures for restructuring of loans and credits, the minister said.

In reply to another question, Patel said that Air India did not raise its fares in the recent past to remain competitive during the economic meltdown but was compelled to increase domestic fuel surcharge by Rs 400 in view of the increase in prices of ATF.

Extending a helping hand to Air India, the government on Saturday asked the finance ministry to critically examine the "extent of

assistance" to be given to the national carrier and the petroleum ministry to extend the credit limit initially for three months.

This was decided at a meeting of the high-level committee, headed by Cabinet secretary K M Chandrasekhar, set up to monitor Air India's cost cutting measures. The Committee met for the first time on Saturday and vetted the cash-strapped carrier's plans to cut costs and generate revenue.

Official sources said Air India's parent company, National Aviation Company of India Limited (NACIL) has been asked to appoint a Cost Auditor to monitor costs.

The auditor would ensure that cost reduction measures and operational efficiencies are implemented on a day-to-day basis, sources said.

The national carrier is estimated to suffer a loss of Rs 7,200 crore in the last financial year.

At the meeting, it was decided that the finance ministry would be asked to "critically examine the extent of assistance" that could be given to NACIL to come out of the major financial crisis it is facing, sources said.

The petroleum ministry would also be asked to extend the credit limit to Air India, initially for three months, they said, adding that the airline made a presentation before the high-level committee on various cost reduction and revenue generation measures it plans to take up.

After the meeting while speaking to reporters here, Air India CMD said, the "government is with us" and would give full backing to the airline on its growth and cost-saving plans.

The focus of these plans were on revenue generation, he said, adding that the airline would keep the committee updated on these plans at its meetings to be held every month from now onwards.

Air India, which has been losing an estimated Rs 250 crore a month, has chalked out a turnaround plan aimed at generating Rs 3,000 crore through internal accruals over the next six months. The plan also includes steps to mobilise additional revenue of Rs 1,800 crore through cost-cutting and savings.

The national carrier is understood to be seeking a soft loan of Rs 3,000 crore from the government, apart from equity infusion. The airline has ordered 111 aircraft at a cost of over Rs 50,000 crore but has an equity base of only Rs 145 crore.

Aviation minister Praful Patel told TOI that the initial equity infusion would be limited to Rs 2,000-2,500 crore. The government may make only a partial contribution. The balance will be raised from the market via the IPO route at a later date, he said. Patel assured that the equity sought from the government would be kept low. AI is also learnt to be looking at an immediate soft loan of about Rs 10,000 crore from the government.

The airline currently has an equity base of Rs 145 crore. The merged airline, National Aviation Company of India Ltd (NACIL), accumulated losses of Rs 7,200 crore till March. The AI-IA combine is to receive 111 new aircraft worth $11 billion (list price) to replace decades-old planes in its fleet. Until now, 51 new planes worth $4 billion have joined the fleet. But the slowdown, which has hit all airlines, has affected the already struggling AI particularly badly and it needs a massive cash infusion to stay in the skies.

So, armed with a plan for cost-cutting and revenue enhancement, AI chief Arvind Jadhav met the CoS to seek a bailout. The CoS, which includes the finance and aviation secretaries Ashok Chawla and M M Nambiar, was set up to examine issues related to the national carrier after Prime Minister Manmohan Singh met Patel last month.

Making a presentation to the committee of secretaries (CoS) on Saturday to get bailout funds may be the easy part for National Aviation Company of India Ltd (NACIL) — the Air India-Indian Airlines combine. For, cost-cutting moves like salary slashing, returning of expensive planes and creating new revenue generating streams, admit top officials, will be an uphill task.

However, it was made abundantly clear to NACIL that any financial help from the government will come, if and only if, NACIL is able to convince it about two things — it has a plan, and more importantly, that it can implement it. Also, any assistance from the government would have to be matched by an aggressive cost reduction, including a drastic cut on salaries, and a better revenue management by NACIL and that it must come up with a concrete cost reduction proposal.

Significantly, the CoS decided that NACIL would appoint a cost auditor immediately to monitor, review and ensure that the cost reduction and operational efficiencies are effected, a statement issued by the aviation ministry after the CoS meeting revealed.

On the salary front, AI and IA give their 31,000-odd employees performance-linked incentives (PLI), which comprises almost 60-80% of their overall pay package at senior levels. NACIL has an annual wage bill of Rs 3,100 crore for its 31,000 employees, with PLI accounting for almost half the salary expense. Now, AI is trying to cut the PLI but reaching an agreement with unions could be more difficult than pruning some staff through leave without pay or VRS routes.

During the Saturday meeting, NACIL chief Arvind Jadhav told the CoS that the airline needs the new aircraft to compete in market. With a price tag of $11 billion, these new planes will mean a huge repayment liability for the cash-strapped airline.

‘‘We currently have over 40 leased planes that were taken on very high rentals in a period when air traffic was booming, aircraft were in short supply and lease rentals were high. The monthly lease bill is about Rs 100 crore. These planes will be returned but in this depressed market conditions

, the aircraft owners are not willing to terminate leases easily as they may not be able to find takers for these planes after getting them back,’’ said a senior official.

The idea is to save money on lease dole outs and, instead, use that for paying for the new planes that would also be very fuel efficient unlike the old rented ATF guzzlers. But getting the companies to take the planes back is going to be a huge challenge. A leased Boeing 777, for instance, has a monthly rental of $9 lakhs.

During the two-hour meeting, a presentation was made to the committee of secretaries (CoS), which is headed by cabinet secretary K M Chandrasekhar by the ministry and SBI Caps on financial restructuring, which basically means cost-cutting and enhancing revenue. T

The airline also told the panel that it needed new aircraft to phase out the old ones in its fleet in order to compete. NACIL said it will reduce its annual wage bill of Rs 3,100 crore by finding a low-cost alternative to the performance-linked incentive that employees get and which accounts for nearly half of the total salary bill.

The CoS asked NACIL to immediately appoint a cost auditor. They have presented an annual cost-cutting plan but that was not specific. AI has to come up with a more detailed plan, possibly with quarterly benchmarks, whose progress can be monitored.

Civil aviation minister Praful Patel hit turbulence in the Upper House on Tuesday. The high-profile minister came under severe

criticism as non-Congress parties joined hands to attack him for the problems that threaten to ground the national carrier, Air India.

Congress's decision to stay neutral provided little comfort to Patel, as BJP's Prakash Javadekar, along with CPM's Tapan Sen and CPI's D Raja, let loose a withering attack. Javadekar was particularly severe as he alluded to the role of middlemen and alleged corruption in all big deals involving Air India. "How is it that names of Talwar and Dogra surface in every deal," he asked.
The assault on the minister focussed on award of bilateral rights to foreign airlines on routes where AI had traditionally made profits, purchase of aircraft and pulling out the carrier from profitable and busy domestic routes.

Non-Congress members demanded a white paper and a probe by Joint Parliamentary Committee into the affairs of Air India which incurred a loss of Rs 5,000 crore in 2008-09 and accumulated losses expected at Rs 7,200 crore.

Javadekar asked why the issue of Air India-Indian Airlines merger was not brought before Parliament and why the merger had not resulted in profit for the national carrier. He also wanted to know why new planes were being bought from two different companies, and why AI was giving away bilateral rights to international airlines. Giving the specific instance of Emirates, he said that while the Gulf-based airline was operating 185 flights every week to various destinations in India, Air India could, in return, operate a meagre 20-25.

BJP's Ravi Shankar Prasad asked if there was a vested interest behind the deteriorating financial condition of Air India. Shiv Sena's Bharat Rout, CPM's Tapan Sen and CPI's D Raja also asked why AI was not operating in busy and profitable sectors. "Why have these slots been given away to private airlines," they asked. Javadekar said route rationalisation had resulted in Air India's domestic share coming down from 40% to 14%.

While ignoring a majority of pointed queries by members, Patel said the government was planning equity infusion in AI and soft loan, something that has never been done in its 60-year history. He justified acquisition of new fleet on the ground that it was ageing and despite new arrivals, only 55 of 111 have come, average age of planes is 15 years.

Admitting that despite merger, a solution has not been found in three years, Patel ascribed continuing losses to global recession which has resulted in losses by airline companies throughout the world. He also said surge in oil prices has adversely impacted the cost of operation and contributed to bad financial health.

Denying insinuation of corruption in buying of AI fleet, Patel said it was done through a well laid out procedure. He also said merger was not a figment of imagination which was done after recommendations of an empowered group of ministers and committee of secretaries.

On the issue of bilateral arrangements, Patel said it was an ongoing process and pointed out that in case of Gulf region, AI was protected for three years. But on route rationalisation, Patel said the decision was purely of AI.

Jet Airways posts net loss of Rs 225 cr
24 Jul 2009, 1827 hrs IST
Faced with intense competition and high interest cost, private carrier Jet Airways India on Friday (July 24) reported a net loss of Rs 225.33 crore during the first quarter ended June 30, 2009. The airline had a net profit of Rs 143.38 crore in the same period last year. Total income declined to Rs 2,371.21 crore during the quarter from Rs 2,867.16 crore in the same quarter last fiscal, the private carrier said in a filing to the Bombay Stock Exchange (BSE). "The company during the quarter ended June 30, 2009 suffered losses mainly on the account of lower yields due to intense competition and over capacity in the market besides high interest cost," the company said. "The company continues to implement cost control measures and rationalisation of routes to be able to compete in a dynamic environment, all of which would result in arresting losses incurred by it," it added. In a separate filing to BSE, the company said that the board has approved raising $400 million. Shares of Jet Airways India settled at Rs 247 on BSE, up 0.43 per cent from previous close.

Govt appoints SBI caps to prepare growth plan for AI

22 Jul 2009, 1710 hrs IST, PTI

NEW DELHI: Ahead of a high level committee vetting its restructuring plan, government has appointed SBI Caps to prepare a growth plan for the

cash-strapped national carrier Air India.

"We have appointed SBI Caps. Soon, we would be getting feedback on what would be the short, medium and long term restructuring required for Air India," Civil Aviation Minister Praful Patel said while speaking at an event on India Aviation 2010 international exhibition here.

The minister said that the national carrier would soon get an organisational restructuring plan and will go under a major transformation in the near future.

"We will be undergoing a major transformation of the management. We will involve lot of important and eminent people on the board of Air India and have an international advisory board as is a practice across the world," Patel said.

"We will be having a Chief Operations Officer (COO), who will be assisting the Chairman and Managing Director, and will run the airline in totality with a good team and this is what is exactly needed in the years to come," he added.

Stressing on the need for Air India to streamline its operations, he said, "I am sure they would want to cut out loss making routes. The government does not get into the business of regulating routes and this is a deregulated sector and applies to the national carrier also."

The minister also said that government will not interfere in day to day functioning of the national carrier but Air India will also have to show enthusiasm for its revival.

Also Read

Speaking on the issue of the carrier's decision to buy 111 aircrafts, the minister said, "Government did its best to support the initiative from Air India. We didn't decide what they wanted."

Commenting on the plans to impose the Under Development Fees (UDF) and Development Fees (DF) at airports that come under Airports Authority of India (AAI), he said, "To make airports more viable economically, we have to see how to sustain the developmental programme. As UDF or DF has been sanctioned for the airports in Delhi, Mumbai and Hyderabad, we would also like to extend that model for the AAI airports also."

"For their developmental programmes in airports in Kolkata, Chennai and other cities where they are putting in large investments proportionate or rather disproportionate to the kind of revenue they would earn in short and medium terms. We definitely look at extending this model to AAI airports also," Patel added.

A 7-step action plan to rescue Air India

Industry analysts outline measures Jadhav and his team could take to steer it into calmer climes

P.R. Sanjai

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Mumbai: Airlines and the millions of passengers they shuttle around the globe share a common experience: Periods of smooth flying are interspersed with nervous episodes of gut-wrenching turbulence.

Air India is now in the middle of one of those bumpy patches.

India’s national carrier had accumulated losses of Rs7,200 crore on 31 March. Salaries were delayed in June because of a severe cash crunch. Borrowings at least doubled to touch Rs15,241 crore in June, from Rs6,500 crore in November 2007. The airline has asked the government to infuse Rs5,000 crore of equity and give a soft loan of Rs10,000 crore to help it stay on course in the midst of violent cross winds.

Towering issues: (top) Air India aircraft at the Mumbai airport. PTI; the Nariman Point building in Mumbai. Girish Srivastava / Hindustan Times

Arvind Jadhav, a 1978-batch officer of the Indian Administrative Services (IAS) who took charge as chairman and managing director of the government-owned National Aviation Co. of India Ltd (Nacil) in May, has a tough task ahead of him, as he attempts a safe landing for the company that runs Air India.

It will not be easy going. These are tough times for the global airline industry, which is caught in a pincer of high fuel prices and slack demand. Besides, Air India has its own problems: stiff competition from domestic and global airlines that have greater access to the Indian market, poor passenger demand due to the economic downturn, high interest costs because of an ambitious plan to buy new planes, a delay in integrating Indian Airlines and high jet fuel prices.

Jadhav will have to submit a turnaround plan to Prime Minister Manmohan Singh on 25 July.

“One has to take harsh and drastic steps to overhaul Air India. Certainly, this is not going to be an overnight exercise, but it needs to make a turnaround plan that will be followed by a specific business plan,” says a director of Air India. He did not want to be identified.

But just as sharp downturns are common in the global airline industry, smart turnarounds are not unheard of either.

Also See Falling Fortunes and Turnaround Lessons (PDF)

Many international airlines have survived such tough times. Germany’s Deutsche Lufthansa AG, that runs Lufthansa German Airlines, also had losses during the 1990s. It swung back to profits by 1999. UK’s British Airways Plc and SriLankan Airlines have similar stories to tell. SriLankan Airlines had to deal with terrorism, as when separatist group Liberation Tigers of Tamil Ealam (LTTE) had bombed Colombo Airport—the hub for the carrier—several times. In December 2005, Malaysia Airlines had cash to support just four months of operations. It was a profitable airline two years later.

What can India’s own national carrier learn from these episodes?

Mint spoke to several management consultants, airline experts and Air India directors to collate a list of seven steps Jadhav and his team need to take on board as they try to steer Air India into calmer climes.

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AAI writes to Air India: clear outstanding Rs650 cr bill

This comes as Air India is hoping for a government bailout in the form of either soft loan or equity infusion

Swati Khandelwal / CNBC-TV18

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Mumbai: The Airports Authority of India (AAI) has written to cash-strapped Air India asking it to pay in full Rs650 crore of outstanding airport charges.

This comes as Air India, which has been facing a financial crisis in the past few years, is hoping for a government bailout in the form of either soft loan or equity infusion.

Civil aviation minister Praful Patel is due to meet Prime Minister Manmohan Singh soon on the airline’s restructuring plan. People familiar with the matter say Air India management is likely to ask for around Rs3,000 crore from the government.

Reacting to the development, an Air India spokesperson said: “We have been paying AAI on a regular basis. There are some pending dues which would be paid over a period of time.”

Air India had earlier sought more time to pay the dues in tranches, but it failed to do so.

Unlike private airlines that have to give bank guarantees or fixed deposits, which can be encashed if the airline defaults on payment, Air India has to give nothing.

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National air-carrier, Air India on Wednesday announced special fares on its select domestic sectors to attract passengers during the lean season.

The tickets under the special fares, which are in two categories, can be purchased upto three days before flying and would be valid till 20 September, Air India said.

The first category of special fares, available on 24 domestic sectors on the airlines’ network, comprises of basic fares and passenger service fee, the release said.

No fuel surcharge would be applicable on these fares, it said. Under the offer a Mumbai-Hyderabad travel would cost only Rs2,079. Similarly, a Mumbai-Kochi travel would cost Rs3,279 and Mumbai-Bangalore Rs2,779, the release said.

The second category of special fares offers would be applicable on 70 select domestic routes and exclusive of all taxes and passenger service fee, Air India said.

However, a passenger would have to pay user development fee at aiports where its is applicable, the release said.

Meanwhile,Air tickets will cost more with Jet Airways (India) Ltd and Kingfisher Airlines Ltd increasing the fuel surcharge by Rs400 each on all domestic sectors from Wednesday, attempting to counter a steep increase in the price of jet fuel. Other airlines are likely to follow suit.

Expensive fares: A Jet Airways aircraft at New Delhi airport. The airline says a fare hike had become necessary. Ramesh Pathania / Mint

Jet Airways said the increased surcharge, which would now stand at Rs3,400 per ticket, would be applicable on tickets of the full-service carrier as well as its two low-fare subsidiaries, JetLite and Jet Airways Konnect.

“Jet Airways has decided to increase its fuel surcharge by Rs400 on all domestic sectors with effect from tickets purchased starting June 17,” an airline spokesperson said.

The increase was necessitated by a 33% rise in the price of jet fuel since March this year, a Jet Airways spokesman said. On 15 June, state-run oil firms increased the price by 12%.

“Consequent upon successive increases in the price of ATF (aviation turbine fuel, or jet fuel), the fuel surcharge for travel on all domestic sectors of Kingfisher Airlines will be increased by Rs400 with effect from today,” a Kingfisher Airlines spokesperson said.

The increase would apply uniformly for travel across all distances and all classes of travel, including Kingfisher Red, the spokesperson said.

When contacted, an Air India spokesperson said, “We are also seriously contemplating an upward revision in fuel surcharge in view of the continuous increase in ATF prices.”

He said the national carrier would be able to take a decision “in a couple of days”. Air India currently levies a fuel surcharge of Rs1,950 and Rs2,700 on air tickets up to and beyond 750km, respectively.

No-frills carriers IndiGo, SpiceJet and GoAir are yet to take a decision, officials at the three airlines said. These carriers currently charge Rs2,000 as a fuel surcharge.

International crude oil prices have firmed to a seven-month high of $72 (around Rs3,440) per barrel on hopes of a revival in US demand.

Airline Ambiguity | On-time showing better, but travellers still suffer

Domestic carriers reported improved performance in June but not all of them are clear about the rules

Tarun Shukla

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New Delhi: New Delhi-based Ajay Relan prefers to attend a meeting in Mumbai only if it’s post-noon, because more often than not his early morning flight from the Capital lands late. “Either on the ground or before you take off...normally, a Mumbai-Delhi flight which is 1 hour 40 minutes ends up being two-and-a-half hours. If you take an 8 o’clock flight from Delhi, its tough to make it to the 11 o’clock meeting in town (south Mumbai),” said Relan, former managing director and India head of Citi Venture Capital International (CVCI), the private equity business spun off from Citigroup Inc.

Unclear picture: One reason why the statistics might be at odds with passenger experience is the way the government defines ‘on time’. Bharath Sai / Mint

Despite Relan’s experience and that of countless others, the latest government statistics reveal that India’s domestic airlines registered 81.6% on-time performance in June, up from 79.5% in May. That would mean that at least eight in every 10 flights in the country were on time.

And at the level of individual airlines, there have been some radical improvements between May and June.

India’s civil aviation ministry in May made it mandatory for airlines to report their on-time performance. And one reason why the statistics might be at odds with passenger experience is the way the government defines “on time”—up to 15 minutes delay in take-offs or landings.

Another reason is that not all airlines are clear about the nuances of this definition. For instance, in the case of take-offs, the Directorate General of Civil Aviation, or DGCA, follows the international definition. The take-off time is defined as that when the chocks or wedges that keep an aircraft stationary on the tarmac are removed and it starts rolling on the runway, said Naseem Zaidi, director general of civil aviation.

But not all airlines get this. Two executives, one at a low-cost carrier and the other at a full-service airline independently confirmed this but asked not to be identified, given the sensitivity of the matter.

There’s yet another reason for the data looking healthier than most flyers’ perception of reality—the fudging of data.

“In one or two cases we have found difference in what they say and what the Air Traffic Control says,” Zaidi said.

DGCA has now created a task force that will be stationed at eight airports across India to check the on-time performance of airlines.

June figures released by the government do not include data for one airline, Paramount Airways, because of “ambiguity” found by DGCA. Mint couldn’t independently ascertain what DGCA meant by the use of this term or, indeed, what the ambiguity in Paramount’s data was.

M. Thiagarajan, managing director of Paramount Airways, said the airline was in the process of preparing an explanation. The data was compared incorrectly, he added, as one of the airline’s aircraft was not in service. The discrepancy, Thiagarajan said, also came about because several flights had been removed from the system for that duration and the data could have been compared with the old flight schedule.

To be sure, DGCA’s confusion over Paramount’s on-time data may have to do with simply not understanding the way it is presented. A senior government official who is familiar with the matter and asked not to be identified said the number of delays reported by the airline was actually lower than that reported by air traffic control.

In May, Paramount reported 89% on-time performance, IndiGo 85.7% and Jet Airways 84.4%. MDLR Airlines with 49.3%, JetLite with 70.5% and Air India with 72.4% were at the bottom of the list. In June, IndiGo reported on-time performance of 87% and Jet Airways 86.4%, but it was those at the bottom the previous month that showed the most improvement—MDLR reported 67%, JetLite 80.4%, and Air India 75.7%.

Baggage handling data in India is still not tracked or made public, but Zaidi said DGCA would “gradually” move towards doing this too. “Passengers must know everything.”

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US pact speeds trials for India's $10.4 bn jet buy

22 Jul 2009, 1524 hrs IST, REUTERS

NEW DELHI: India will begin field trials in August to buy 126 fighter jets, defence officials said on Wednesday, moving forward on the $10.4

billion deal two days after New Delhi agreed a defence pact with the United States.

The announcement of the defence agreement came at the end of U.S. Secretary of State Hillary Clinton's trip to India, which aimed to deepen ties and advance defence and civilian nuclear cooperation.

Boeing's F/A-18 Super Hornet, France's Dassault Rafale, Lockheed Martin Corp's F-16, Russia's MiG-35, Sweden's Saab JAS-39 Gripen and the Eurofighter Typhoon, produced by a consortium of European companies, are all ready for the trials, Indian defence officials said.

"The trials will begin in August and will take nearly a year to complete tests in all weather conditions," defence ministry spokesman Sitanshu Kar said.

The trials for one of the biggest defence contracts currently in play got delayed by India's April/May elections.

Opposition parties during the campaign pressed a longstanding objection to signing a defence pact with the United States, which Washington wanted to ensure its sophisticated weapons were not given to third countries and were used as intended.

This week, the two countries agreed on an end-use monitoring (EUM) pact, a development welcomed by Lockheed and Boeing, the two U.S. companies competing for the contract.

"This signals an era of increased defence cooperation between the United States and India and we look forward to supporting the requirements of the Indian armed services," said Richard Kirkland, president for Lockheed Martin in South Asia.

Boeing said the "landmark pact" would make it easier to share important U.S. defence technology with India.

"Boeing looks forward to working within the framework of this agreement to support India in modernising its defence forces," the company said in a statement.

Lockheed last year sold six C-130J military transport planes to India for about $1.1 billion, while its U.S.-based rival Boeing has already sealed a $2.1 billion deal to sell eight maritime patrol aircraft.

Both companies along with the Eurofighter Typhoon are the frontrunners, three senior air force officials said privately.

India is one of the world's biggest arms importers, and its government plans to spend more than $30 billion over the next five years to upgrade its largely Soviet-era arsenal to counter potential threats from Pakistan and China.

Talks between Indian officials and the bidders have been held to work out the trials, and test pilots have been chosen, air force officials said.

Thousands strike in South Africa

Striking workers are demanding a 15% wage increase

Central Johannesburg has been brought to a halt as hundreds of South African workers marched as part of a strike to demand higher wages.

Many commuters were stranded because buses failed to run. Rubbish has also not been collected.

About 150,000 workers in the country have stopped work. Unions say most public services are disrupted.

Analysts say the strikes and recent unrest are the first major challenges for new President Jacob Zuma.

He has called for understanding from workers, but the BBC's Jonah Fisher in Johannesburg says crowd-pleasing promises he made during his election campaign are proving hard to keep.

Our correspondent says a pledge to create 500,000 new jobs has already been retracted.

In recent weeks, there have been violent protests over the lack of housing, water and electricity in the poorest townships.

Strike season

Dale Forbes, from the South African Municipal Workers Union (Samwu), said most members had gone on strike from 0700 (0500 GMT).

He said he was confident the public was backing the strike.

South African residents of Balfour run during riots with police on July 22, 2009

Townships residents have been protesting at the lack of basic services

"They want to see dramatic improvements in service delivery - which must start with improvements in the conditions of the workers," he said.

Services such as Johannesburg's Metro Bus service are not operational.

The Metro Police who are in charge of traffic policing in the country's major cities are also taking part in the strike.

Members of Samwu and other unions walked out after being denied a 15% wage increase. They rejected an offer of 11.5%.

The country has already faced a major strike by construction workers, which threatened stadiums being built for next year's football World Cup.

That strike was ended earlier this month after workers and employers agreed a 12% pay rise.

Mr Zuma took power in May after an election campaign in which he pledged to ease poverty.

He was supported by the main union federation, Cosatu, and the South African Communist Party which wanted a change in the previous administration's economic policies, which they said were too pro-business.

However, South Africa has since entered its first recession in 17 years, making it more difficult for Mr Zuma to increase state spending.

SOUTH AFRICA - NEW CHALLENGE