Civil aviation ministry pushing to enhance airlines’ credit limit under ECLGS

Alarmed by the weak financial state of Indian airlines, the civil aviation ministry is pushing to enhance the credit limit to them under the government’s Emergency Credit Line Guarantee Scheme (ECLGS), According to a report published by The Economic Times.

Civil aviation secretary Rajiv Bansal last week wrote to the finance ministry, asking that under the scheme, airlines be allowed to avail of additional debt of up to 100% of their outstanding credit, subject to a cap of INR 1,500 crore.

“Last three years have been very challenging for the civil aviation sector. Just when the aviation sector was returning to normalcy, the airlines have been hit by an unprecedented rise in jet fuel prices. Jet fuel is a major component of airline operating costs. Further, the devaluation of INR from USD 70 to USD 80 has aggravated the situation."Rajiv Bansal, Civil Aviation Secretary

Reasoning why an enhanced credit line is important for airlines, Bansal said an unprecedented rise in jet fuel price and devaluation of the rupee against the dollar had increased their operating cost.

The ECLGS scheme, announced in 2020, has been designed to provide collateral-free, government-guaranteed loans to mitigate the financial distress caused by Covid on businesses.

Just like other contact-intensive sectors, companies in the aviation sector could refer the highest credit outstanding on any of the three reference dates of February 29, 2020, March 31, 2021, or January 31, 2022, to avail of funding under the scheme.

Civil aviation ministry pushing to enhance airlines’ credit limit under ECLGS

The aviation industry is facing severe funding roadblocks even as skies are opening up and the impact of Covid-19 is on the wane. Loans for Indian airlines have dried up as banks have become cautious to lend to the sector.

The programme has raised loans for eight companies in the industry, including SpiceJet and Go First. SpiceJet has received a guarantee of INR 127.52 crore, while Go First received INR 25.65 crore from the programme.

While market leader IndiGo has been able to tap banks to raise loans due to its strong cash position, it has become difficult for smaller airlines like SpiceJet and Go First to get loans from banks due to their stressed balance sheets.

ALSO READ - SpiceJet set to receive funds through ECGLS, an extension of up to 3 months for AGM’22

SpiceJet is likely to receive around INR 225 crore next week as a part of the ECLGS

SpiceJet is likely to receive around INR 225 crore next week as a part of the Emergency Credit Line Guarantee Scheme (ECLGS). The funds will be used to clear statutory dues and lessor payments. SpiceJet had applied for INR 280 crore loans under the ECLGS.

Launched by the central government as a special scheme in wake of Covid-19 in 2020, the programme intended to provide guarantee coverage to banks and NBFCs to enable them to extend emergency credit to various industries to meet their working capital requirements.

Under ECLGS, an aviation sector company can get a loan of up to 50% of its total credit outstanding across all lending institutions. However, the amount borrowed by the company can not be more than INR 400 crore.

(With Inputs from The Economic Times)

Tata Sons Ltd, the holding company of the Tata group, plans to raise USD 4 billion to infuse fresh capital into Air India and refinance costly debt, according to a report by Mint, citing two people directly aware of the matter.

Tata plans to raise funds through a mix of equity and hybrid debt to refinance a part of Air India’s debt and revamp the airline, the people told Mint, requesting anonymity. Tata Sons acquired the airlines in October last year at an enterprise value of USD 2.3 billion from the government.

“The Tata group will soon start the process of hiring investment advisers, although informal discussions with a few foreign lenders and some private equity funds are already underway," one of the people told Mint.

Tata Sons to raise USD 4 billion to infuse fresh capital into Air India

“The debt refinancing portion will be relatively easier as lenders within Tata’s existing banking relationships will step in," the second person told Mint. “The equity component of the transaction may take a bit longer given that globally, the number of private equity funds that invest in airline business are relatively few," the person added.

Spokespeople for Tata Sons did not respond to an emailed query by Mint on the fundraising plan.

Last month, another report stated that Tata Sons will likely make a provision for INR 2,600 crore as accumulated losses for AirAsia India airlines.

Tata Sons will likely make a provision for INR 2,600 crore as accumulated losses for AirAsia India airlines.

ALSO READ - Tata Sons likely to merge the losses of AirAsia India with Air India before the possible merger

CCI in June this year approved Tata Group-owned Air India’s proposal to fully acquire the equity share capital of low-cost carrier AirAsia India. Tata Sons, which majorly owns AirAsia India with a shareholding of 83.67% and AirAsia Investment Limited controls the rest of the stake in the budget carrier.

Reportedly, according to the latest figures, Air India’s domestic market share shrank to 10.2% in January 2021, just after Tata Sons completed the acquisition, from 11.6% in January 2020.

Air India’s domestic market share shrank to 10.2% in January 2021, just after Tata Sons completed the acquisition, from 11.6% in January 2020.

In July, Air India’s market share further shrank to 8.4%, while market shares of Vistara and AirAsia India, the Tata group’s other two airlines, stood at 10.4% and 4.6%, respectively, according to the Directorate General of Civil Aviation (DGCA). Go First and SpiceJet’s market share stood at 8.2% and 8%, respectively.

In July, IndiGo, India’s largest carrier, had a domestic market share of 58.8% as against 56.9% in June. Vistara flew 1.01 million passengers, and Air India flew 810,000 passengers in July.

“The fund infusion is crucial for Air India’s operational efficiency to regain market share. The fund will be used to bring in new aircraft and offer differentiated customer service initiatives, which will attract passengers," said the first person.

As part of its fleet enlargement plan, Air India has determined to permit its pilots to fly until they’re 65.

ALSO READ - Airbus, Boeing compete to get Air India’s deal

Tata is undertaking an overhaul and expansion of Air India and its unit Air India Express, according to the two people, and is about to close orders for around 200 narrow-body A320 Neo jets and widebody aircraft. These are likely to be delivered by the beginning of next fiscal.

ALSO READ - Air India plans to let its pilots fly until the age of 65

As part of its fleet enlargement plan, Air India has determined to permit its pilots to fly until they’re 65. The determination was made public on July 29. DGCA permits pilots to fly until the age of 65, whereas the retirement age at Air India as a public sector firm was 58 years.

(With Inputs from Mint)

A Mumbai-bound flight of Vistara returned to Delhi after a "whistling" sound was heard on the right side of the Boeing B737 aircraft cockpit, a DGCA official said.

The DGCA ( Directorate General of Civil Aviation) has ordered a probe into the incident even though no structural deficiency was observed during the preliminary ground inspection of the plane.

The airlines - a joint venture between Tata and Singapore Airlines Limited, confirmed the return of its Mumbai flight UK 951 back to Delhi, saying that the pilot decided to do so after a technical snag was detected shortly after its take-off.

Vistara has a fleet size of 51 aircraft.

An alternate aircraft was immediately arranged to fly the passengers to their destination.

Vistara operated its B737-800 aircraft with registration VT-TGB while operating flight UK 951, which was involved in air turnback to Delhi as a whistling sound was heard from the right side of the cockpit.

The Tata Group also owns Air India beside Vistara its low-cost international arm Air India Express and it holds a majority stake in low-cost airline AirAsia India.

ALSO READ - Technical snag on Vistara flight

Alliance Air has assured pilots that restoration of salaries to the pre-COVID level will be discussed by its board later this month after a section of the airline's pilots went on strike on Friday, September 2.

The pilots' strike, which resulted in the cancellation of various flights, was called off late on Friday, September 2 after the airline told them that the salary issues will be looked into, according to a source in the know of the developments.

ALSO READ - Alliance Air pilots go on strike over salary issues

Alliance Air, owned by the government, operates around 100 flights daily. It has a fleet of 21 aircraft, including 19 ATR aircraft and 2 Dornier planes.

Alliance Air to hold a board meeting to reinstate pilot salaries

Alliance Air currently connects 48 destinations within India. Pre Covid-19, the airline had been flying to 62 destinations, including international destinations such as Jaffna in Sri Lanka.

In internal communication, Alliance Air CEO Vineet Sood told pilots that the airline has partially restored their salaries in April.

The carrier is considering further restoration of salaries from September onward and the board will discuss the matter during its meeting scheduled for September 16, as per the communication. One of the pilots' demands is the restoration of salaries to the pre-COVID level.

"Difficult decisions have been taken in these distressed times, which I strongly believe were necessary to keep us afloat and I am proud that all of you have contributed towards the cause and that is the reason Alliance Air has survived and is on a gradual path to recovery.With respect to salary restoration, we have already reinstated salary partially in the month of April 2022 and are considering further restoration of salary from September 2022 onwards for which the Board meeting is scheduled on September 16, 2022."Vineet Sood, CEO, Alliance Air

However, the airline is still in losses, despite various measures it has taken to improve its financial health of the company. Despite all odds, he has ensured that monthly salary is paid on the 1st of every month consistently to generate the required confidence in employees.

After the disinvestment of Air India to the Tata Group last year, Alliance Air is the sole carrier left with the central government. The Centre is preparing to also sell Alliance Air to a private player.

Alliance Air has a fleet of 21 aircraft, including 19 ATR aircraft and 2 Dornier planes.

He said this is a financial decision and requires approval of the Board. "We are relentlessly working for a positive outcome," he added.

In the wake of the pandemic, the salaries were cut by 60% and till now, the pay has not been fully restored, the source said. Alliance Air is yet to state the pilots' strike or salary issues.

Alliance Air is currently the last government-owned airline in India after Air India was sold off. Air India has gradually restored some salaries since April and has said that it may also reinstate other crew allowances.

ALSO READ - Centre begins work on privatisation of Alliance Air & other Air India subsidiaries

The government has abolished more than 3,000 CISF posts as part of a major security architecture overhaul at Indian airports under which non-sensitive duties will be rendered by private security personnel aided by smart technology tools for surveillance and protection, officials said.

Around 1,900 private agency guards will take over non-core security roles at over 50 airports in the country. These will replace Central Industrial Security Force (CISF) personnel in a revamp that aims to provide cost-effective, reliable, and professionally competent security services at airports.

ALSO READ - Airports can now station private security guards

The Bureau of Civil Aviation Security (BCAS), the aviation security regulator, issued a circular in this regard in May, and airports have now begun roping in private guards for non-core functions such as segregation of passengers at departure and arrival gates, access control/document check-in security hold areas, access to visitor gallery, and security of vital installations.

Around 3,000 CISF posts at airports have been abolished following this exercise.

The CISF has also removed over 1,100 personnel from airports. Around 3,000 CISF posts at airports have been abolished following this exercise. At present, CISF has around 29,000 personnel deployed at 65 airports.

"We have taken a three-pronged approach to the rationalisation of CISF manpower at airports. We considered architectural designs, technical interventions (installation of in-line baggage systems, CCTVs, etc), and replacement in non-core areas."Jaideep Prasad, BCAS Joint Director General

Private security agencies will have to receive a security clearance and undergo a security programme approved by the BCAS. The agencies will also have to abide by our rules and regulations.

The hiring of private guards is also expected to lower aviation security costs at airports because their salaries are estimated to be lower than that of CISF personnel.

At present, airports bear the expenses of security cover provided by the CISF and this is recovered from passengers in the form of an aviation security fee. Airports will be reimbursed for costs related to the deployment of private agency guards, a source said.

Private security agencies will have to receive a security clearance and undergo a security programme approved by the BCAS.

“The CISF will continue to be in charge of core areas of security at airports, involving anti-hijack measures and perimeter protection,” a Mumbai International Airport spokesperson said. Private agency guards have been deployed after elaborate pre-deployment and on-the-job training, the spokesperson added.“

The Airport Authority of India is in the process of deploying private security agency personnel at 46 airports. “Private security guard deployment is expected to start upon receiving security clearance from the BCAS,” the AAI said.

A work order has been issued to 21 agencies for providing guards at 36 airports, and a tender is under process for the balance of 10 airports.

The financial crisis at SpiceJet is hurting employees dearly. The struggling to-survive airlines, which have delayed August salaries, are allegedly defaulting on depositing tax deducted at source (TDS) with authorities and allegedly not depositing PF in employee accounts.

It is yet to give employees Form 16 for fiscal 2021-22 due to which they are facing issues in filing tax returns. It is also reportedly defaulting on some statutory payments too, claim sources.

ALSO READ - Spicejet looking for a “knight in shining armour” to help with financial distress

“There has been certain deferral on discharging of payments but no default on any statutory payments. The company has been actively paying dues and clearing the outstanding. SpiceJet has been discharging its current GST liabilities on a regular basis.The company has been making payments as per mutually agreed payment plan and we have discharged our liabilities until February 2022. SpiceJet will receive more than INR 200 crore next week as part of the emergency credit line guarantee scheme (ECLGS) and the money will be used to clear other statutory dues and lessor payments."Spokesperson, SpiceJet

ALSO READ - SpiceJet set to receive funds through ECGLS, an extension of up to 3 months for AGM’22

The government amended the income tax law in Budget 2021 to ensure that employers deposited the employees' EPF dues on time. According to the amended income tax law, if employers fail to make timely deposits of EPF dues, they will not be eligible for the deduction (employers may claim a tax deduction on the EPF contribution deposited as an expense).

The Employees' Provident Fund Organization (EPFO) offers account holders the option to view their employer and personal contributions to their EPF online.

An employer is required to deposit the EPF contribution within 15 days of the month ending for which salary has been paid, according to tax experts. The Employees' Provident Fund Organization (EPFO) offers account holders the option to view their employer and personal contributions to their EPF online.

Employees with accounts at the trust, however, should ask their employer about the passbook to verify the regular deposits. Many such employers have been defaulting on PF contributions, however, employees can check if their employer is contributing the amount.

The cash-strapped airline’s troubles have been mounting in the past few months.

Struggling to-Survive SpiceJet allegedly not depositing PF in employee accounts

ALSO READ - Worst nightmare of SpiceJet – From financial losses widening to the CFO resigning to non-payment of salaries

SpiceJet on August 31 declared losses of INR 1,725 crore for the full year of FY 22. The airline also reported a loss of INR 783.60 crore for April-June of FY 23 as compared with a loss of INR 729 crore in the year-ago period.

Meanwhile, SpiceJet employees alleged delay in the disbursal of salaries for the second straight month, with the budget airline saying the payments were being made in a “graded format”.

(With Inputs from The Times of India)