No plans to re-introduce price caps on airfare

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.

ALSO READ - Finance ministry increases credit limit for airlines under ECLGS

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.

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

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.

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

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."

ALSO READ - Tatas likely to offer a stake to Singapore Airlines, for Air India – Vistara merger

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.

ALSO READ – Air India gets CCI’s approval to acquire the entire stake in AirAsia India

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.

ALSO READ – Air India unveils Vihaan.AI – a comprehensive 5-year transformation plan

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.

ALSO READ - Air India to revamp its fleet by leasing 30 aircraft in the upcoming months

 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.

The government may take a call on the strategic sale of Pawan Hans after clarity on the pending case against Almas Global Opportunity Fund SPC, the lead member of the winning bidder consortium, emerges later this month, an official said. Pawan Hans is a 51:49 joint venture of the government and ONGC.

"The Almas Global case is scheduled for hearing at the NCLAT this month. We want to give the bidder due opportunity to meet the eligibility criteria before taking a final call (on whether or not to proceed with Pawan Hans handover)," an official told PTI.

ALSO READ - Government sells its stake in Pawan Hans to Star9 Mobility for INR 211.14 crore

The government had in April decided to sell the helicopter service provider for INR 211.14 crore to Star9 Mobility Pvt Ltd -- a consortium of Big Charter Private Ltd, Maharaja Aviation Private Ltd and Almas Global Opportunity Fund SPC. Almas Global holds 49% of the special purpose vehicle (SPV), while Big Charter has 26% and Maharaja Aviation owns 25%.

The bid price of the consortium was above the INR 199.92 crore reserve price fixed by the government based on a valuation carried out by the transaction advisor and asset valuer.

Star9 Mobility, was only created in October 2021 and the company has not filed a single annual return, and its paid-up capital was INR 1 lakh. Some reports also said Star9 Mobility doesn’t have any helicopters of its own, while Big Charter had just three. Further, Almas Global was alleged to have no experience in this sector.

ALSO READ - Government pauses the Pawan Hans sale after issues raised about the winning bidder

However, in May the government had to put the sale process of Pawan Hans on hold after it came to light that the lead member of the winning bidder consortium Almas Global Opportunity Fund SPC has a case pending against it at the National Company Law Tribunal (NCLT).

Almas Global has now approached the appellate tribunal NCLAT for the resolution of the dispute. "If the hearing concludes this month then we can expect a decision on Pawan Hans. If there is a next date for the NCLAT hearing, then we will have to wait for that before taking a call," the official added.

“The government will take a final call on the divestment of the company and the handover to the winning bidders, but until that happens we are looking to improve the balance sheet and streamline operations of Pawan Hans,” a senior company official said, asking not to be identified.

He added that with the induction of six new Sikorsky S-76D helicopters and a fall in aviation turbine fuel prices in 2022, the helicopter services company is aiming to post a profit in 2022-23 after recording an operating profit in 2021-22.

“The government’s renewed focus on the helicopter market in India over the last year, coupled with measures to boost the helicopter industry in the country, has created a demand for our helicopters,” the official said.

He added that not only is Pawan Hans sweating its helicopters wherever possible but is also exploring leasing options for its fleet by tying up with private companies. The company has 47 aircraft, which include Sikorsky S-76D, Dauphin N and N3, Kazan MI 172, and Eurocopter AS350 helicopters, apart from a host of Bell choppers.

Pawan Hans had reported an operating loss of Rs 27.12 crore and a net loss of Rs 33.15 crore in 2019-20 amid the pandemic. The company, however, turned a corner to report an operating profit of Rs 27.78 crore in 2020-21 and narrowed the net loss to Rs 17.70 crore.

Realtor Mack Star Marketing has sent a legal notice to low-fare carrier Go First for not paying dues worth INR 2.6 crore. This is for a property called Kaledonia in Andheri, suburban Mumbai. Go Airlines which brands itself Go First and Mack Star entered into a leave and licensing agreement in 2018.

The agreement was renewed earlier this year. A person in the know said the airline had been late in paying its rent since March this year. It hasn't been paid since June. "The company has given the airline a notice to clear its dues in 10 days or vacate the premises in a month," said the person in the know.

A spokesperson at Go First didn't respond to text queries until the story went to press. The airline, like its peers, has been hit by the pandemic which battered airline demand and has been trying to raise funds. It had mulled an IPO earlier this year but hasn't gone ahead with its plans yet.

ALSO READ - Go First to postpone IPO again till November

Wadia group-owned Go First has once again deferred its initial public offering (IPO) to raise INR 3,600 crore till November on weak consumer sentiment surrounding aviation stocks.

ALSO READ – Go First files for IPO at INR 3,600 crore valuation

Go First has been advised to wait for the new ATF pricing mechanism to kick in before launching its IPO. The new ATF pricing mechanism is expected to boost sentiment in the aviation sector. The airline had planned to come out with its delayed IPO in the second quarter of this financial year, but will now wait for a couple of months before considering a launch.

Go First plans to use INR 2,200 crore to be raised from the IPO to reduce debt and repay lessors. The remaining INR 1,600 crore will be deployed to expand the airline’s operations in India and internationally, including adding flights to Indonesia, Malaysia, Singapore, Sri Lanka, and Nepal.

The airline expects domestic passenger traffic to surpass pre-COVID-19 levels by 5-10% by the second quarter of 2022-23 in the absence of a new wave of COVID-19.

ALSO READ – Go First plans to launch the IPO by July after months of deliberation; mulls inducting more aircraft

The airline plans to convert its entire fleet of Airbus A320 Neos and Airbus A320 Ceos to Airbus A321 Neos. The airline currently has 52 A320 Neos and 6 A320 Ceos in its fleet.

A MiG-29K fighter jet of the Navy crashed during a routine sortie off the Goa coast today after developing a technical malfunction. The pilot ejected safely and was rescued in a swift search and rescue operation, the Navy said in a statement.

A board of inquiry (BoI) has been ordered to investigate the cause of the crash. It was the fourth accident involving the MiG-29K since 2019.

The MiG-29K is fitted with the Russian-built K-36D-3.5 ejection seat, widely considered the most sophisticated in the world. In the event of the ejection handles being pulled, the pilot in the rear seat is ejected first, followed by the pilot in the front.

The aircraft crashed while it was returning to the base.

In November 2020, a fighter pilot died after a MiG-29K crash. While one of the pilots was rescued soon after the incident, Commander Nishant Singh's body was recovered 11 days after the crash.

Another MiG 29K crashed the same year in February after being hit by birds. Both pilots had steered the jet away from habitation before ejecting, an action which drew praise from Union Minister of State for Defence Shripad Naik.

In November 2019, a MiG-29K trainer aircraft crashed outside a village in Goa. Both the pilots had ejected safely.

With inputs from ndtv.