IndiGo promoters feud - No direction to the firm in the arbitration award

The final arbitration award in the matter involving the spat between IndiGo promoters Rahul Bhatia and Rakesh Gangwal has been issued by the London Court of International Arbitration, but no directions have been issued to InterGlobe Aviation.

IndiGo, the country's largest airline, is owned by InterGlobe Aviation.

InterGlobe Aviation said in a regulatory filing that it has received the final arbitral award, dated September 23, issued in the arbitration proceedings in which it was also named as a respondent.

InterGlobe Enterprises Ltd (IGE) and Bhatia brought the case against Gangwal, the Chinkerpoo Family Trust, and Shobha Gangwal (RG Group).

Left - Rahul Bhatia, Right - Rakesh Gangwal (Image Courtesy - Hindu Business Line)

On October 1, 2019, the IGE Group had submitted the request for arbitration to the London Court of International Arbitration.

"According to the award, no directions have been issued to the company. The award has issued directions to each of the AG Group and IGE Group about the relief sought by them against each other," InterGlobe Aviation said in the filing on Friday.

The award also directs the reimbursement of the company's costs incurred as a result of the IGE Group's arbitration, according to the statement. It was impossible to obtain specific information about the award.

The company was named as a respondent in the arbitration proceedings, but neither the IGE Group nor the RG Group sought any monetary compensation from the company.

(Image Courtesy - Bloomberg Quint)

According to the filing, the IGE Group sought various reliefs from the RG Group, including compliance with the shareholders' agreement and the company's Articles of Association (AoA), as well as damages.

"The AG Group also sought certain reliefs against the IGE Group, including to carry out all required steps and actions, provide consents and assistance to remove certain transfer restriction provisions from the company's articles," it added.

In July 2019, Gangwal wrote a letter to the Securities and Exchange Board of India (SEBI) alleging that the airline's corporate governance standards are failing and that some questionable related-party transactions have taken place between IndiGo and Bhatia-owned InterGlobe Enterprises. These allegations were denied by Bhatia's IGE Group.

InterGlobe Aviation settled the SEBI case in February 2021. (Image Courtesy - Business Standard)

InterGlobe Aviation, on the other hand, settled the SEBI case in February 2021. The company that operates IndiGo airlines, InterGlobe Aviation, paid INR 2.10 crore to the Securities and Exchange Board of India (SEBI) to settle a pending case, and SEBI ended adjudication proceedings against InterGlobe Aviation as a result of the settlement.

IndiGo offered to settle the case "without admitting or denying the findings of fact and conclusions of law" and filed a settlement application with SEBI, according to the order.

InterGlobe Aviation's settlement terms were presented to the High-Powered Advisory Committee on January 25, 2021, and the committee recommended that the adjudication proceedings be settled for INR 2.10 crore, according to SEBI.The two promoter groups own 74.84% of the stock as of March 31, 2021, while the public owns 25.16%. Bhatia and his associates own 38.20% of the company, followed by Gangwal and his associates, who own 36.63%.

An IndiGo flight from Kolkata to Hyderabad (6E 946) made an emergency landing at the Biju Patnaik International Airport here due to a medical exigency, airport sources said. The flight to Hyderabad was diverted to Bhubaneswar due to a medical emergency relating to the breathing problem of a 59-year-old man, they said.

The flight made an emergency landing around 6 PM on Thursday, September 30. The patient, identified as Jayabrata Ghosh, was travelling along with three family members, the sources said.

(Image Courtesy - Odisha Bytes)

Ghosh was attended by a doctor in the flight itself who detected cardiac problems and suggested that the patient be immediately admitted to the nearest hospital for further medical assistance.

From the airport, the patient was shifted to a hospital in critical condition by an ambulance of the Airports Authority of India. He was accompanied by IndiGo staffers. The flight took off for Hyderabad after the man and his family members were deboarded.

In a similar incident on September 6, a Delhi-bound IndiGo flight made an emergency landing in Guwahati after it suffered a bird attack in its engine.

The aircraft suffered damages in one of its engine blades in the air, forcing the pilots to return to the original airport immediately. All passengers and crew on board were safe.

For every INR 100 invested in civil aviation, the country receives an economic output of INR 325 and for 100 new direct aviation jobs, 610 more indirect jobs are created, civil aviation minister Jyotiraditya Scindia said on Thursday, September 30, highlighting the need for developing the sector in India.

International business, investments, trade and jobs cannot be generated without connectivity, the minister said. Therefore, India must become an aviation hub to facilitate better connectivity, he argued.

He was speaking at the 116th annual meeting of the PHD Chamber of Commerce and Industry. The sector was already contributing close to 3.5% to India’s GDP in an environment where just 10-11% of the population travelled by air, Scindia said.

“The creation of an aviation hub in India is extremely important. Increasing long haul flights means we have to get more wide-bodied aircraft. And this will be a challenge in the days to come but aviation hub has to come back on our agenda as a country, as a ministry and as an industry.And what that tells us is that the runway is immense. And we are today, just about entering the taxiway of the runway, no pun intended. The potential of this sector is tremendous.We are going to build aggressively, connect aggressively. And not only the metros but places like Darbhanga, places like Jharsuguda in Odisha, Kadapa, and many more."Jyoiraditya Scindia, Union Minister for Civil Aviation

With 20-40 million more middle-class families expected to start travelling by air in the near future, there is a great opportunity for growth in the sector. In the next 5-6 years, more people could be travelling by air in India than by air-conditioned trains, he added.

The national infrastructure pipeline for civil aviation was close to INR 90,000 crore and the government was going to build this infrastructure “aggressively.”

Cover Picture Credit - Cirium

In what could be a game-changer for Chennai airport, the Airports Authority of India is mulling constructing a parallel runway to reduce congestion and improve capacity.

Sources said a few weeks ago, at a high-level meeting, an idea was proposed detailing why Chennai airport should have a parallel runway. “A team from the headquarters will carry out a feasibility study in a few months on where it can be constructed, how much land needs to be acquired, what will be the capacity enhancement and the pros and cons of building it. Only based on the conclusions of the report, it will be decided whether or not to go ahead with this plan. One of the options we have considered is to build it close to the 30-end of the secondary runway, extending towards the Tambaram side. It will be implemented only if it is safe,” a source said.

Runway of Chennai Airport (Image Courtesy - The New Indian Express)

According to sources, Chennai airport needs to get airside capacity enhancement. For the last two years, the airport has been lagging behind the other metro airports such as Delhi, Bengaluru and Mumbai in terms of air traffic and passenger traffic growth. At present, there are two runways i.e. the main runway and a secondary runway and their capacities are limited, which causes congestion. The cross runway operations are not carried out now.

The source further added that the team is planning to build a parallel runway close to the 30-end of the secondary runway, extending towards the Tambaram side, but it will be constructed only if it is safe.

In 2016, a plan was chalked out to build a parallel runway and 1,084 acres of land was also notified by the state government. However, later on, the idea was dropped as the residents living nearby opposed the plan. Sources believe that Chennai airport needs a parallel runway as the city does not have a second airport.

Parallel runway at Delhi Airport. (Image Courtesy - Fortune India)

While Delhi had parallel runways already, Bengaluru became the first in south India to have independent parallel runways. On March 26, 2021, Kempegowda International Airport scripted history when its northern runway was re-opened for operations along with its southern runway.

The Centre has to look to put in place certain systems to boost long-haul international flights of Indian carriers to places such as Europe and South America, Union Minister for Civil Aviation Jyotiraditya Scindia said on Thursday, September 30.

"We have to aim to make India a robust aviation hub where we can fly more passengers from India to the world and vice versa," he said during an event organised by the PHD Chamber of Commerce and Industry.

(Image Courtesy - The New Learn)

Scindia said connectivity to Europe, North America, Canada, Mexico, South America and parts of Central Asia has to be boosted using the hub-and-spoke model.

"Therefore, the creation of a hub in India is extremely important. Increasing long-haul flights means we have to get more wide-bodied aircraft.Increasing long-haul flights will be a challenge in the days to come but aviation hubs have to come back on our agenda as a country, a ministry and an industry.On the one side, the country has to concentrate on the domestic travel side, while on the other, it also has to think about the international travel site.And we have to look at putting in place systems that allow connectivity on long-haul travel to places like Europe where we have just one or two (Indian) airlines catering to these destinations."Jyotiraditya Scindia, Union Minister for Civil Aviation

Scheduled international passenger services have been suspended in India since March 23, 2020, due to the coronavirus pandemic. However, special flights have been operating since July last year under bilateral "air bubble" arrangements between India and approximately 28 countries.

SpiceJet's plans to spin off its logistics and cargo operations into a separate company called SpiceXpress are being challenged in court, with lenders and aircraft lessors opposing the move.

SpiceJet's lessor, Goshawk, and its trustees have petitioned the Delhi High Court (HC) for an injunction against the airline's plan to transfer any of its assets to a separate company until it pays $16.2 million in unpaid lease rentals on three aircraft.

In its interim order, the Delhi HC has restrained SpiceJet from alienating the assets.

(Image Courtesy - Burmarrad (Mark) Camenzuli)

“Till further orders, the judgment debtor is restrained from transferring/alienating its assets to the tune of the decretal amount,” stated the Delhi HC order.

The development is a big hurdle for the airline since hiving off and monetising the cargo unit remains one of the key strategies to recapitalise the company. The next date of hearing is on November 29. SpiceJet is in talks with multiple private equity investors to sell shares in the logistics arm to raise money.

People aware of SpiceJet’s business plans indicated that investors in their talks have made it clear that they want the cargo business to be ring-fenced and kept at an arm’s length from the passenger business.

The airline has also approached the Ministry of Civil Aviation for a new air operator permit for the cargo arm and has set up management, separate from the passenger business.

However, the airline said the request for a stay has been declined by the court on the transfer of the logistics business to its subsidiary.

“We would not want to get into the detailed interpretation of the court matter since it is sub-judice. We have been in discussion with all MAX lessors for a settlement and return to service of these aircraft. We have already done so with Avolon and CDB Aviation and discussions with other lessors, including Goshawk, are on. None of the MAX lessors (including Goshawk) has terminated any of the leases and is continuing to make all commercial efforts to resume safe operations of the MAX fleet."Spokesperson for SpiceJet

Last week, the company announced that it had received shareholder approval for a slump-sale of its cargo and logistics services business to SpiceXpress and Logistics, valued at INR 2,555.77 crore.

Slump sale refers to the transfer of one or more undertakings for a lump sum payment, regardless of how the undertakings were acquired. Individual assets and liabilities are not valued in such sales.

SpiceJet had leased three Boeing 737s from Goshawk (one B737-800 and two B737-MAX8s). On account of the Covid-19 pandemic, travel restrictions were imposed, resulting in the worldwide grounding of Boeing MAX8s. As a result, SpiceJet defaulted on its rent payment obligations and Goshawk appealed in a UK court for a summary judgment about its claim for arrears.

In May, the UK court passed a summary judgment, in which it ruled that Goshawk is right in claiming the amount, but stayed its order asking the lessor and SpiceJet to instead mediate saying that SpiceJet is currently in a precarious financial state and an order to pay all outstanding amounts may push it into bankruptcy.

Aircraft lease agreements are covered under the ‘hell or high water clause, which implies that lessees (in this case, airlines) should continue paying lease rentals, irrespective of any issues like financial losses.

Sources aware of the development said that the mutual mediation between Goshawk and SpiceJet has failed, following which Goshawk has moved Delhi HC to enforce the order.

SpiceJet's lenders were also concerned about the move. SpiceJet's cargo division has brought in revenue in the absence of growth in the passenger business. The logistics company would be spun off, removing one of the most important cash streams. According to sources, the airline has agreed with lenders that cash generated from the cargo arm's monetisation will be used first to pay off debts. An undertaking like this could aid the airline in obtaining a no-objection certificate from banks.

With the passenger business severely hamstrung, the logistics business has virtually been a lifeline for the airline. The logistics arm - SpiceXpress - earned a net profit of INR 30 crore, with revenue for the segment up 285% to INR 473 crore for the first quarter of 2021-22, from INR 166 crore in the same quarter last year.

This is a far cry from just five aircraft a year ago, with a fleet of 20 aircraft that includes four wide-body aircraft on wet-lease and passenger aircraft converted to carry cargo. The wide-body aircraft, which it wet-leased from Hi Fly, has been flying to multiple destinations in Africa, Europe, and Asia, including Lagos, Brussels, and Frankfurt, as well as Kabul, Tashkent, and Almaty. By the end of the year, it plans to add eight more wide-body planes.

(With inputs from Business Standard)