ICRA indicates a negative business outlook towards Indian aviation

Commenting on the monthly aviation industry’s monthly domestic passenger data for the month of September 2022, the aviation rating agency ICRA has indicated a negative business outlook while mentioning that rising prices of aviation turbine fuel (ATF) and the general inflationary environment continue to stifle the industry earnings.

ATF prices in October are currently higher by about 60% on a YoY basis. However, the same declined by 4.5% sequentially. While airlines have been increasing yields, the same has not been adequate to offset the impact of the rising ATF prices, in ICRA’s view.

The outlook reflects ICRA’s view that the financial performance of Indian airlines is likely to remain under pressure in the near term, even as recovery in domestic passenger traffic has been healthy. Elevated ATF prices will continue to pose a major threat to earnings and the liquidity profile of the airlines in the near to medium term.

ICRA indicates a negative business outlook towards Indian aviation

Also, the depreciation of the INR against the USD (which adversely impacts lease rentals, maintenance costs and other overheads) will have a major bearing on the airlines’ cost structure. This apart, likely near-term relaunch of Jet Airways and the entry of low-cost domestic carrier, Akasa Air, will further intensify competition in the domestic aviation industry.

The airlines’ efforts to maintain and/or grow their market share will limit their ability to expand margins in an elevated fuel cost environment.

While some airlines have adequate liquidity and/or financial support from a strong parent, which is likely to help them sustain over the near term, for others, the credit metrics and liquidity profile have been under significant stress over the past few years.

Some airlines have also sought a deferment in their lease rental payments to improve their liquidity positions.

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To ease liquidity pressures, most airlines had undertaken several cost rationalisation measures, including salary cuts for their employees, leave-without-pay options and laying off pilots and crew members to cut costs during the pandemic. Some airlines have also sought a deferment in their lease rental payments to improve their liquidity positions.

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“The domestic aviation industry continues to witness recovery. Domestic passenger traffic for September 2022 is estimated at 103 lakhs, 2% higher compared to 101 lakhs in August 2022 and 46% higher in comparison to the domestic passenger traffic in September 2021. Though it fell short by 10%, compared to pre-Covid levels i.e., September 2019. For H1 FY2023 (April-September 2022), domestic passenger traffic is estimated at 627 lakhs, a YoY growth of 111%, and lower by 11% compared to April-September 2019 (pre-Covid levels)."Suprio Banerjee, Vice President & Sector Head - Corporate Ratings, ICRA Limited

Others have also entered sale and lease-back transactions to shore up liquidity in the near term. However, until the RASK-CASK spread improves, airlines will require funding support to meet expenses.

ICRA expects a fast-paced recovery in domestic passenger traffic in FY2023, aided by normalcy in operations and widening vaccination coverage.

The Doha-based carrier, Qatar airways is in the midst of a recruitment drive which will lift its total workforce to more than 55,000 from around 45,000 currently, a spokesperson, who declined to be named.

Qatar Airways is boosting its workforce by 10,000 to handle an influx of passengers flying into Doha for the soccer World Cup and in line with a broader post-pandemic expansion, the airline told Reuters.

The Doha-based carrier is in the midst of a recruitment drive which will lift its total workforce to more than 55,000 from around 45,000 currently.

Qatar Airways to hire 10,000 staff amid World Cup preparations.

"Qatar Airways is on a growth trajectory following COVID and with World Cup preparations in full swing it is ramping up recruitment across the airline."The company said in a statement.

The airline declined to say how many of the new positions would be permanent. It cut staff levels to below 37,000 in 2021 after reducing its destinations to 33 cities during the height of the pandemic in 2020.

Recruitment events were held in the Philippines, India and other countries at the end of September, the spokesperson said.

It is not yet clear how many of the new staffers will be in place when the World Cup kicks off on Nov. 20 in Qatar, the first Middle East country to host soccer's main event.

Qatar airways has since ramped up operations back to more than 150 destinations.

During the tournament, Qatar Airways is adjusting 70% of its schedule to make way for additional flights arriving in Doha and has canceled other flights and reduced frequencies in order to free up aircraft to meet demand from fans.

Other airlines will significantly increase flights to Qatar, which has reopened an old airport for the event.

"It will be a huge challenge to be able to manage this very fast moving demand for very large numbers of spectators."Akbar al-Baker, Qatar Airways CEO.

With inputs from businesstoday.

After opposition parties targeted the Goa government alleging it is secretly trying to close the Dabolim Airport, Goa Chief Minister Pramod Sawant on Thursday clarified that even after Mopa airport is operational it will not shut down.

“Many have expressed concern about Dabolim airport. I want to assure them even after Mopa airport is operational this airport will not be shut down."Sawant said during a programme in Mormugao, South Goa.

“Next week, we will plan how to make division of flights (landing), if international flights land at Mopa then national flights can be landed here,” Sawant said.

Transport Minister Mauvin Godinho on Wednesday had expressed fear that Goa Dabolim Airport may shut down if local taxi operators fail to support ‘app-based taxi service’.

There are many plans to keep Dabolim airport operational.

“If transportation mess continues at Dabolim then everyone will prefer to fly from Mopa,” he had said.

After the statements made by Godinho, Congress and Goa Forward Party had targeted BJP government stating it is trying to shut down the Dabolim Airport secretly.

“The government wants to shut Dabolim airport and promote Mopa airport, operated by private company,” Leader of Opposition Yuri Alemao had said.

With inputs from economictimes.

The Indian government had removed price caps on domestic airfare on August 31, 2022 after a span of approximately 27 months.

The government is not planning to re-introduce price caps on airfares as it does not want to interfere with market dynamics.

The government believes that the festive demand raising airfares will improve airlines’ financial health. The decision to remove airfare caps has been taken after careful analysis of daily demand and prices of air turbine fuel.

https://twitter.com/JM_Scindia/status/1557318186948632576?s=20&t=hJr6stTKR_lYtCBBM-0sMQ

Stabilisation has set in and we are certain that the sector is poised for growth in domestic traffic in the near future."Jyotiraditya Scindia, Aviation Minister.

The move comes at a time when fuel prices are stabilizing and demand is inching back to pre-COVID levels.

The decision will bring relief to airlines such as IndiGo, SpiceJet Ltd, Air India, Vistara, Akasa Air, allowing them to price tickets freely.

Airlines are of the view that removal of the pricing caps is required for the full-fledged recovery of the sector.

The ministry had imposed lower and upper limits on domestic airfares based on flight durations when services were resumed in May 2020, after a two-month lockdown due to the Covid-19 pandemic.

As per the caps, airlines could not charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) for domestic flights of less than 40 minutes.

The lower cap on airfares was imposed primarily to protect financially weaker airlines while the upper caps were imposed to protect passengers from high fares.

Domestic airlines SpiceJet and Go First (previously Go Air) have applied under the Emergency Credit Line Guarantee Scheme (ECLGS) for which the government had last week raised the loan limit.

According to a report published by CNBC TV18, Bank of Baroda and Axis Bank have been slated to disburse funds to airlines under the ECLGS scheme, sources said, adding that the lenders will take four to six weeks to start releasing the funds.

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The Finance Ministry last week revised the loan limit under the scheme to INR 1,500 crore from INR 400 crore to help the COVID-hit aviation industry tide over liquidity stress.

SpiceJet and Go First to get funds under modified ECLGS

Sources said that SpiceJet was expecting to receive an additional INR 1,000 crore as part of the modified ECLGS.

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On the other hand, SpiceJet continues to remain under enhanced surveillance of the Directorate General of Civil Aviation (DGCA) till October 29. The aviation regulator had on July 27 cut the airline's operations by half of its departures that had been approved under the summer schedule and before that, issued a show-cause notice saying the airline had failed to "establish safe, efficient and reliable air services".

ALSO READ –DGCA extends the 50% cap on SpiceJet flight operations; keeps it under enhanced surveillance

SpiceJet continues to remain under enhanced surveillance of the Directorate General of Civil Aviation (DGCA) till October 29.

The regulator will decide on extending the 50% cap on SpiceJet's operations. They said the cap did not affect a single flight of SpiceJet as fewer aircraft were being deployed anyway.

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The government is ready to consider the airline’s request to deploy more aircraft and does not want to constrain air capacity, they said.

Separately, sources also said that discussions had taken place on using one or two per cent sustainable fuel in aircraft. Indian Oil Corporation is working on two pilot projects in Gujarat and Haryana’s Panipat to develop sustainable fuel for aircraft as the availability of fuel remains an issue.

(With Inputs from CNBC TV 18)

Singapore Airlines has confirmed that it is in talks with India's Tata Group over a potential merger of Vistara airline, a joint venture between the two companies, and Air India -- the 100% acquisition of which the Indian conglomerate has recently completed.

The confirmation comes amid Indian media reports that Tata, having completed its acquisition of a 100% stake in Air India, and looking at merging it with Vistara. Tata has a 51% stake in Vistara, while SIA holds 49%.

"The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India," SIA said in a statement to the Singapore Exchange. "The discussions are ongoing and no definitive terms have been agreed upon between the parties."

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This comes two days after Tata Sons chairman N Chandrasekaran said he wants a single airline with two platforms — meaning full service by integrating Vistara with Air India and budget by merging AirAsia India (AAIPL) into Air India Express.

“We will have both— full services and low-cost services—but we want to make it a world-leading airline of scale, where Indians can fly everywhere. That's the goal, it’s a long journey,” Chandrasekaran had said on Tuesday, October 11 promising a wide global network to Indian globetrotters.

It is unclear what stake, if any, SIA would have if Vistara merged into Air India, or whether fresh funds would be needed for the ailing Air India group, according to a report by The Straits Times. The SIA statement noted that any deal would need the green light from Singapore's competition watchdog and the authorities in India.

Vistara was established in 2013, giving the SIA group a stake in India's fast-growing aviation sector. India has strong domestic and international traffic flows, which are tipped to more than double over the next 10 years.

The International Air Transport Association has noted that India will become the third-largest aviation market in the world - including international and domestic traffic - by around 2024. Indian Civil Aviation Minister Jyotiraditya Scindia said in November 2021 that India has already become the third-largest domestic aviation market in the world.

The SIA sees the Vistara stake as an integral part of its multi-hub strategy, giving it access to important sources that complement its strong Singapore hub, said The Straits Times report. It provides Vistara with operational and management expertise while Tata provides the corporate umbrella and domain knowledge in India.

SIA, which was focused on repairing its balance sheet, did not take part in the bidding process, but Campbell Wilson, a former senior executive at the Singaporean carrier, started as Air India's new chief executive in July.

Vistara's chief executive is Singaporean Vinod Kannan, who has been seconded from SIA. His predecessor was his colleague Leslie Thng, who has returned to Singapore and is now CEO of Scoot.

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The Competition Commission of India in June cleared the merger of AirAsia India with Air India. The National Company Law Tribunal approval, too, would be required for the merger. Currently, executives of both airlines are holding discussions on fine-tuning various aspects related to integration — product, services, etc.

In 2021-22, Vistara made a loss of INR 2,031 crore on a revenue of INR 5,226 crore. In contrast, Air India posted a loss of INR 9,556 crore on a revenue of INR 19,815 crore.

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While SIA views India as an important market for its multi-hub strategy, the Tatas want to make Air India the flagship airline of their aviation business. The group is also aiming for a 30% market share for Air India in the domestic market as part of a five-year transformation plan released last month.

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 In September, Tata Group announced Air India’s first major expansion wherein it promised to add 30 new aircraft in the coming months which would boost its fleet by over 2. The group signed leases and letters of intent for 25 Airbus narrow-body and five Boeing wide-body aircraft.

Air India had a market share of 8.4% in August. The plan itself was an indication of the merger of all group airlines. AirAsia India and Vistara had a share of 4.6% and 10.4%, respectively.

Merging Air India and Vistara could form a more significant competitor to India's current dominating low-cost carrier IndiGo and also to several Middle Eastern rival airlines that transport a critical portion of India's international traffic. Air India has also been launching more international services to North America, another key market for Singapore Airlines to deepen its footing.