AirAsia-Linked Entity Advances in Bid for SriLankan Airlines

As Sri Lanka moves forward with its plans to divest a majority stake in SriLankan Airlines, recent developments shed light on the entities vying for involvement in the strategic aviation sector. Among them, an entity closely associated with AirAsia has emerged as a contender, marking a significant milestone in the ongoing restructuring process.

Entities Progressing in the Bid

Following the acceptance of Request for Qualification (RfQ) submissions by Sri Lanka's State-Owned Enterprises Restructuring Unit (SRU), six entities have been identified as advancing to the next stage of the selection process. Notably, AirAsia's consulting arm, AirAsia Consulting Sdn. Bhd., stands out as the sole entity with ties to a major airline among the contenders.

Accompanying AirAsia Consulting Sdn. Bhd., are FitsAir, a privately owned Sri Lankan low-cost carrier (LCC) with a fleet of three A320-200s, and a diverse array of investment entities including Dharshaan Elite Investment Holding Ltd., Sherisha Technologies Ltd., Hayleys PLC, and Treasure Republic Guardians Ltd. Each entity brings its own unique strengths and perspectives to the table, signaling a diverse pool of potential investors.

Significance of AirAsia's Involvement

The inclusion of an entity linked to AirAsia in the bidding process underscores the airline's keen interest in expanding its footprint beyond its home base. AirAsia, renowned for its innovative approach to low-cost travel, could potentially bring valuable expertise and resources to SriLankan Airlines, paving the way for enhanced competitiveness and operational efficiency.

Evaluation Process and Criteria

While participation in the RfQ process represents a crucial step forward, it does not guarantee eventual participation in the bid for SriLankan Airlines. The SRU emphasizes the importance of adhering to the Special Guidelines on Divestiture of State-Owned Enterprises, approved by the Cabinet of Ministers, which outline stringent technical, legal, and financial requirements for potential investors. As such, entities will undergo rigorous evaluation to ensure alignment with these criteria.

Debt Restructuring and Financial Implications

Amidst the divestiture process, attention is also drawn to the financial landscape of SriLankan Airlines. Reports indicate that the government will assume responsibility for a substantial portion of the airline's debt, amounting to LKR 100 billion rupees (USD 332.6 million). However, a USD 175 million international bond, backed by a sovereign guarantee and due for settlement in June 2024, will remain on the carrier's balance sheet. Additionally, potential windfalls from an arbitration case against Airbus could further impact the financial outlook for the airline.

Conclusion

As Sri Lanka endeavors to conclude the divestiture process by September 2024, the participation of entities such as AirAsia-linked ventures signifies a pivotal moment in the aviation sector's evolution. With careful evaluation and strategic considerations, the future ownership and direction of SriLankan Airlines are poised to shape the country's aviation landscape for years to come.

With Inputs from ch-aviation

JetBlue, a prominent player in the aviation industry, recently disclosed its financial performance for the first quarter of the year, prompting questions about its trajectory amidst various challenges.

Navigating Financial Headwinds

JetBlue announced a net loss of $716 million for Q1 2024, primarily attributed to the fallout from the failed merger with Spirit Airlines. Despite this significant loss, JetBlue's CEO Joanna Geraghty expressed optimism, stating that the results exceeded expectations.

The airline experienced a 2.7% decrease in capacity compared to the previous year, resulting in a 5.1% decline in operating revenue. Expenses surged by 14%, compounded by the failed merger and associated costs, leading to the substantial net loss.

Setback from Spirit Merger

The failed merger with Spirit Airlines, which was halted by a U.S. federal judge in January, incurred substantial costs for JetBlue. The airline agreed to a $69 million payout to Spirit, with additional breakup costs exceeding $530 million during Q1.

During an investor call, Geraghty reassured stakeholders that the Spirit transaction had been resolved, emphasizing JetBlue's commitment to its standalone strategy.

Latin American Conundrum

JetBlue's reliance on Latin American routes, which contribute 35% of its revenue, poses challenges amidst rising capacity in the region. To mitigate losses, the airline opted to withdraw from select South American markets and focus on more profitable routes.

Geraghty acknowledged the pressure on revenue due to heightened capacity in Latin America, signaling a potential setback for the full year. However, she expressed confidence in JetBlue's refocused standalone strategy to regain profitability.

Engine Woes and Compensation Hopes

JetBlue, like many airlines worldwide, grapples with issues surrounding Pratt & Whitney's Geared Turbofan (GTF) engines. The airline anticipates 11 aircraft to be out of service continuously this year due to engine-related concerns, with the number expected to rise in subsequent years.

While compensation negotiations with the engine manufacturer are ongoing, JetBlue is yet to reach an agreement. In contrast, Spirit Airlines recently finalized a deal with Pratt & Whitney, securing a $200 million payout.

Future Fleet and Cost Savings

JetBlue unveiled its aircraft delivery projections for the upcoming years, with a focus on replacing Embraer E190s with Airbus A220s. The transition is expected to yield nearly $100 million in savings for 2024, surpassing previous estimates due to enhanced economics and reduced maintenance costs of Airbus planes.

Charting a Course Forward

Despite encountering turbulence in various forms, JetBlue remains steadfast in its commitment to weathering the storm. With strategic adjustments in route planning, fleet management, and cost-saving initiatives, the airline aims to navigate through the challenges and emerge stronger in the competitive aviation landscape.

As the industry continues to evolve, JetBlue's ability to adapt and innovate will be pivotal in shaping its future trajectory and ensuring sustainable growth in the years to come.

IndiGo founder-promoter Rahul Bhatia’s firm InterGlobe Enterprises (IGE), and C P Gurnani, former Tech Mahindra CEO and now Assago Group chairman, have launched AIonOS - an AI business venture.

Unveiling AIonOS:

This venture aims to propel business transformation through advanced AI technologies with an initial focus on travel-related businesses.

“Starting with the travel, transportation, logistics, and hospitality (TTLH) sector, AIonOS has onboarded several businesses from these verticals as launch customers. This sector alone presents a significant opportunity for AI-driven innovation…. The mission of AIonOS is to empower businesses with advanced AI solutions that not only streamline workflows but also elevate customer experience. AIonOS will redefine the way businesses operate in the digital age. Its products & services serving as a link between a company’s data, its analytical capabilities and operational execution,” a statement announcing the launch said.

Rahul Bhatia said: “InterGlobe has always been at the forefront of innovation and development, and I am delighted that we at InterGlobe are partnering with C.P. on this path-breaking venture. In a rapidly transforming world, it is crucial for businesses to expand their scope and harness the potential of AI. AIonOS is aimed at enabling businesses to accelerate their digital transformation by enhancing human and system capabilities with AI powered solutions. By leveraging our deep sectoral expertise and the power of AI, we aim to revolutionise industries, redefine possibilities, and shape the future of businesses.”

C P Gurnani, executive vice chairman of AIonOS, said: “At AIonOS, we are redefining industry standards with IntelliOS, our AI native platform that enables organisations to initiate their transformation towards cognitive enterprises. We are building SaaS solutions that integrate seamlessly into the fabric of industries such as travel, transport, logistics and hospitality. The first set of use cases include unlocking higher revenue through smarter pricing and delivering superior customer experience. Our approach to AI combines sophisticated technology with the nuances of human interaction in every solution we deliver."

Airlines will now have to ensure that children are seated next to their parents when they fly.

The DGCA has mandated airlines to allocate seats for children of up to 12 years of age with at least one of their parents or guardians on flights travelling on the same PNR (booking reference number).

Also, airlines cannot charge parents/guardians anything extra for seat selection if travelling on the same PNR and they have to maintain a record of the same.

Airlines have been forcing people to pay for seat selection and if they do not pay families end up sitting all around the plane.

“The existing Air Transport Circular 01 of 2021 has been suitably modified to incorporate with a view to alleviate any such situation in future,” the DGCA said in a release.

The DGCA further mentioned that it has revised the Air Transport Circular (ATC)-01 of 2024 titled, “Unbundle of Services and Fees by scheduled airlines”. As per the circular, some services like Zero Baggage, Preferential seating, Meals/Snack/Drink charges, charges for carriage of musical Instruments, etc. have been allowed.

“Such unbundled services are provided on “opt-in” basis by airlines and are not mandatory in nature. There is also a provision for auto seat assignment to the passengers who have not selected any seat for web check-in before scheduled departure,” the release by the DGCA stated.

Even the US is facing similar problems.

US President Joe Biden had on Feb 5, 2023, said on X: "Some airlines charge extra to pick your seat, including for parents who want to sit next to their child on a plane. Congress should pass the Junk Fee Protection Act so we can crack down on these fees and give hard-working Americans just a little bit more breathing room."

Then on March 1, 2023, US department of transport secretary tweeted: "Next week, (the department) will publish a family seating dashboard to show which airlines guarantee families can sit together for free."

Tata group-owned Air India and Vistara are targeting to merge by October, according to Business Line.

The two airlines have sought Directorate General of Civil Aviation (DGCA) views on “crossover training requirements for pilots and crew”. Both have different manuals and procedures.

When pilots switch jobs they typically undergo training to familiarise themselves with the procedures of the new organisation. “Discussion is on with DGCA on the issue of crossover training and if the training period can be shortened. Training the entire set of pilots and crew will require lot of time and will impact schedules,” a person familiar with the matter told the paper.

The two are also waiting for NCLT nod.

One of the key areas to manage carefully will be “migration of Vistara issued ticket passenger name records with those with Air India” and “to minimise the migration hassle, ticket sales on dates beyond actual merger could be stopped on Vistara reservations system” so these flights would be open for sale on Air India systems” which could start two-three months before merger.

The Tata Group in late 2022 today announced the consolidation of its airlines, Vistara and Air India. Vistara is to be merged with Air India post receipt of requisite approvals. As part of the merger transaction, Singapore Airlines shall also invest Rs 2,059 crore in Air India.  Post the consolidation, SIA shall hold 25.1% shareholding in Air India.

The transaction was estimated to be completed by March 2024.

N Chandrasekaran, Chairman, Tata Sons had said: "The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline. We are transforming Air India, with the aim of providing great customer experience, every time, for every customer. As part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance. We are excited with the opportunity of creating a strong Air India which would offer both full-service and low-cost service across domestic and international routes.  We would like to thank Singapore Airlines for their continued partnership.”

Goh Choon Phong, Chief Executive Officer, Singapore Airlines, had said: “Tata Sons is one of the most established and respected names in India. Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in a short time. With this merger, we have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market. We will work together to support Air India’s transformation program, unlock its significant potential, and restore it to its position as a leading airline on the global stage.”

In March this year, the Competition and Consumer Commission of Singapore (CCCS) gave Conditional Approval to the merger of Vistara with Air India and for the SIA group to have a 25.1% stake in the merged entity.

Air India, the flag carrier of India, is set to mark a significant milestone in its aviation journey with the launch of scheduled international A350-900 flights from May 1. This move marks a pivotal moment not only for the airline but also for the Indian aviation industry as a whole.

A350 Fleet Expansion

Earlier this year, Air India embarked on the induction of the Airbus A350-900 into its fleet, signaling a strategic shift towards modernizing its aircraft lineup. Currently operating three active A350s, with a fourth recently delivered, the airline has predominantly utilized these state-of-the-art aircraft on domestic routes within India.

Domestic Operations and Cabin Configuration

Air India's A350s have been serving key domestic routes, linking major cities such as Bengaluru, Chennai, Delhi, Hyderabad, and Mumbai. The cabin configuration of these aircraft reflects a commitment to passenger comfort and luxury, featuring 28 business seats, 24 premium economy seats, and 264 economy seats.

International Expansion and Fleet Upgrade Strategy

With the imminent launch of scheduled international A350 flights between Delhi International and Dubai International, Air India is poised to extend its reach beyond domestic borders. This strategic route choice underscores the airline's focus on connecting key business and leisure destinations in the region.

The introduction of the A350 fleet is part of a broader fleet upgrade initiative at Air India. In addition to the existing and forthcoming A350s, the airline has a substantial order book, including 20 A350-1000s, signaling its long-term commitment to modernization and expansion.

Future Prospects and Expectations

While the specific international routes beyond Delhi-Dubai have yet to be announced, Air India's ambitious fleet expansion plans indicate a promising trajectory for the airline. With 16 more A350-900s in the pipeline, alongside the A350-1000s, Air India is poised to further enhance its global connectivity and passenger experience.

Conclusion

As Air India prepares to embark on its maiden international A350 flight, the aviation industry eagerly anticipates the transformative impact of this milestone. With a modern fleet, strategic route expansion, and a commitment to passenger-centric service, Air India is well-positioned to assert its presence on the global stage and solidify its status as a leading player in Indian aviation.

With Inputs from ch-aviation