Sri Lanka's new government plans to sell its national airline to stem losses

Sri Lanka's new government plans to sell its national airline to stem losses, part of efforts to stabilize the nation's finances even as authorities are forced to print money to pay government salaries.

The new administration plans to privatize Sri Lankan Airlines, Prime Minister Ranil Wickremesinghe said in a televised address to the nation Monday. The carrier lost 45 billion rupees (USD 124 million) in the year ending March 2021, he said just days before the nation is set to formally default on foreign debt.

"It should not be that this loss has to be borne by the poorest of the poor who have not set foot in an aircraft," Wickremesinghe said.

Sri Lanka's new government plans to sell its national airline to stem losses

"The next couple of months will be the most difficult ones of our lives," Wickremesinghe said. "We must immediately establish a national assembly or political body with the participation of all political parties to find solutions for the present crisis."

The premier pledged to announce a new "relief" budget to replace President Gotabaya Rajapaksa's "development" budget that helped stoke Asia's fastest inflation rate.

The cabinet will propose that parliament increase the treasury bill issuance limit to 4 trillion rupees from 3 trillion rupees, Wickremesinghe said, forecasting a budget deficit of 13% of gross domestic product for the year ending December 2022.

Earlier this year, the carrier posted four proposals for a wide range of aircraft types, including Airbus A330 and A350 widebodies and regional Airbus A220s.

In 2010, the government in Colombo bought back a stake in Sri Lankan Airlines from Dubai's Emirates. The national carrier, which has a fleet of 25 Airbus SE planes, flies to destinations in Europe, the Middle East as well as South and Southeast Asia, according to FlightRadar24.

During his previous tenure as Prime Minister, Wickremesinghe unsuccessfully tried to sell off the airline. Through his time in opposition, he has consistently fought for its privatization in parliament, recently criticizing the Chairman of the Committee of Public Enterprise (COPE), Professor Charitha Herath, for failing to control the airline’s finances.

Airline bosses have remained resolute that despite two years of financial losses, its latest Q1 posting has seen it return to the green with a profit of USD$1.7 million, its highest since 2006.

During his previous tenure as Prime Minister, Wickremesinghe unsuccessfully tried to sell off the airline.

With a rapidly improving aviation industry, SriLankan has already started preparations for a busy summer season, doubling flights to nearby India and increasing capacity on services across South Asia and Oceania.

State Minister of Aviation and Export Zones Development, D.V.Chanka, defended the airline’s decision, noting that SriLankan did not use government money to sustain its operations and had already downsized its fleet, reducing costs by USD 25 million. Chanka added that the procurement process would take at least a year and a half and would not use government money for the leases.

The shareholders of InterGlobe Aviation, which operates domestic airline IndiGo, on Thursday, December 30 approved a resolution seeking an amendment to the Articles of Association (AoA) of the company, some of which give one founder the first right to purchase the other’s shares in the company if the latter decides to sell.

InterGlobe’s founders Rahul Bhatia and Rakesh Gangwal have been locked in a feud over several articles in the AoA since 2019. An amendment will lift several barriers to any sale of shares by a founder to a third party. The founders own 74.44% of InterGlobe.

Rakesh Gangwal (Left) and Rahul Bhatia (Right) [Image Courtesy - Bloomberg Quint)

Chairman M Damodaran informed shareholders that the extraordinary general meeting (EGM) had been called on receipt of a joint requisition from the promoters. Later, a filing said 99.99% of shareholders voted in favour of the resolution. The resolution also indicates that the two partners have reached an understanding of the matter.

In 2020, InterGlobe’s shareholders had rejected a similar proposal by Gangwal at an EGM. Gangwal and family together own 36.61% of the airline. Based on the airline’s market capitalisation at the end of Thursday, their shares were worth INR 27,899 crore.

IndiGo's chief executive officer Ronojoy Dutta assured shareholders of the airline that the company will emerge stronger after facing nearly two years of uncertainty due to the COVID-19 pandemic.

“Domestic traffic rebounded strongly in November and December. Omicron has caused future bookings to soften, but these are still above the September levels. While international capacity is restricted, bubble flights to international destinations are performing well.During the past two years, the focus has been building the domestic network, returning inefficient planes at a rate of 45 per year and replacing them with efficient Airbus A320neo aircraft, improving levels of customer service, and growing our charter and cargo businesses. Despite the low level of revenue generation over the past two years, we can confidently state that we are emerging from the Covid-19 crisis structurally stronger as an airline."Ronojoy Dutta, CEO, IndiGo

Dutta listed various steps IndiGo took since the pandemic broke out and said the airline was structurally stronger now than it was in March 2020. He said IndiGo was on the recovery path if there was no third wave.

According to the IndiGo CEO, the airline went through turbulent times, incurred significant losses, and took debt to shore up its balance sheet. “Repairing the balance sheet is an urgent task,” he said.

Speaking at the extraordinary-general meeting (EGM) of InterGlobe Aviation, Dutta said that while at the moment, flight bookings have taken a hit given the outbreak of the Omicron variant of COVID-19, the aviation industry in India is still showing strong signs of recovery and any fall in bookings is likely to be temporary.

If the resolution is accepted, it would end the dispute between the owners Bhatia and Gangwal, who collectively hold 74.44% of the paid-up equity share capital and have been at loggerheads for more than two years now.

The resolution is expected to pass smoothly, given that both the promoters have jointly called the meeting. Once passed, it would allow either side to sell or transfer shares to a third party, without giving each other notice.

The shareholders in the EGM were required to vote on the resolution and the result of the EGM voting that took place via video conferencing would be uploaded within two working days.

The legal battle between the promoters began on July 8, 2019, when Gangwal wrote to the Securities and Exchange Board of India (Sebi), the Prime Minister’s Office and the finance ministry, seeking intervention on various corporate governance issues and the Bhatia Group’s control of the airline.

Gangwal had sought amendments to the AoA to remove rights of Bhatia’s IGE Group on the airline, and raised past related-party transactions, non-independence of the current chairman, and refusal to hold an EGM when he had requested, among other issues.

Bhatia later moved the London Court of International Arbitration (LCIA) against Gangwal. The LCIA in September said the AoA be amended and that the clause regarding the RoFR is done away with. It had given them 90 days to implement its directions. Gangwal had then moved the Delhi high court seeking directions for calling an EGM. However, the court did not allow the plea.

The particular clause in AoA says if a shareholder proposes to sell shares outside the stock exchange, he will have to first notify the other shareholder disclosing the number of shares, the proposed price, the identity of the purchaser, the proposed closing date for the transfer apart from any other material terms of the agreement between the seller and the buyer.

After its worst two years since the second world war, 2022 is looking brighter for the global airline industry. For passengers, though, the chance to travel at low cost again may prove short-lived.

In 2020 international passenger demand was less than 25% that of 2019, according to the International Air Transport Association. 2021 data isn't yet available, but the hiccups of the Delta and Omicron variants make the association's forecasts of 50% of 2019 levels look optimistic.

With international and domestic routes reopening, airlines are offering a range of special deals on airfares. These deals are partly to entice back uncertain travellers and partly to compensate passengers for costs required to travel internationally, such as fees for COVID tests.

They are likely to have a brief lifespan, as the industry comes to grips with post-pandemic realities minus the government support that enabled so many, contrary to predictions, to survive.

Now comes a reckoning, as surviving airlines seek to return to viability, repair their debt-laden balance sheets and future-proof their operations, with no guarantee they'll get the same government support when the next crisis hits.

What this may mean is abandoning the business model of wafer-thin profit margins that delivered ever-cheaper airfares from the 1970s until the beginning of 2020.

Up until the 1970s, the airline industry was highly regulated. Domestically, this was often done by governments to protect state-owned airlines.

Internationally, airfares were kept high by price cooperation through the International Air Transport Association (IATA), often described as a cartel. There were two ticket pricing levels - first-class and economy.

Until 1970 the biggest commercial jet aircraft was a Boeing 707, which could accommodate 180 passengers at a squeeze. Airfares had to be high to cover the high cost of operations (especially jet fuel). Most airlines accepted the IATA fare levels. Discounting was rare.

Then in 1970 came the Boeing 747 jumbo jet, which more than doubled flights' passenger capacity, from 180 to 440.

In the 1980s and 1990s, travel agents began to set themselves up as "bucket shops" specialising in offering discounted airfares to fill empty seats on less popular airlines.

This was how Flight Centre started. It opened its first shopfront in Sydney in 1982, followed by stores in Melbourne and Brisbane. (It now has more than 650 shops in Australia and more than 550 in 10 other countries.)

Lower costs and plummeting airfares made the IATA's fares increasingly irrelevant. With the global rise of low-cost carriers, many of which were not IATA members, IATA finally abandoned the so-called "YY" fare-setting in 2017.

Government regulation was also unwinding. Australia's two-airline policy ended in October 1990. Deregulation permitted more competitors, and airfares were driven by the market rather than set by regulatory bodies.

By 2019, a return fare between Sydney and London on a reputable airline could be bought for about 2019 for less than A$300.

This price falls depended on airlines embracing a business model based on lower profits per customer but flying a lot more customers, cutting fixed overheads by using larger-capacity aircraft.

This business model contributed to the number of global tourists increasing from about 166 million in 1970 to 1.5 billion in 2019. But it also meant airlines needed planes full of passengers to make a profit.

By 2019 the average pre-COVID profit margin per passenger on a long-haul international return flight was about US$10. It's difficult to see how running on razor-thin margins can continue to be the industry model.

In 2022 it is likely we will see a consolidation within the industry, with the airlines that survive looking to diversify into other businesses, such as catering or insurance.

Low-cost carriers may still be viable, but only by convincing customers to pay for "ancillaries" beyond the airline seat, such as in-flight snacks, extra luggage capacity or booking a hire car.

Although most airlines are committed to limiting price increases, there is no escaping the fact they have two years of massive losses to makeup and the continuing extra cost of COVID-related regulations to absorb.

Higher margins with lower passenger volumes look the more probable model.

(With Inputs from PTI)

Come January 5 and 5G broadband service begins in 46 cities in the US. Just before Christmas, the FAA released a Safety Alert For Operators (SAFO) which includes recommended action in the form of Notice To Air Missions (NOTAMs)- restrictions that could possibly curtail airline and general aviation operations in areas where 5G signals broadcasting is set to begin.

Apparently, the regulator is concerned that 5G signals could interfere with the radar altimeters that airliners, bizjets and general aviation aircraft rely on for low altitude flight and hence issued a Special Airworthiness Information Bulletin (SAIB) on the “Risk of Potential Adverse Effects on Radio Altimeters” of 5G deployment.

Fast Company

Now, the US military has joined the bandwagon asserting that the auctioned bandwidth is overly close to the frequencies used for air navigation. Several conspiracy theories have also been doing the rounds pointing to the possibility that the Federal Communications Commission (FCC) could “sell” areas of bandwidth to the highest bidder. If that were to be true, it could lead to “catastrophic failures” and “multiple fatalities”, according to a new report in Defense News

In response, the country's largest network carriers- Verizon and AT&T, agreed to temporarily pause the rollout of 5G service to help FAA buy more time to address the ongoing concerns, which reportedly, expires next week.

Representative | Aviation Today

Although the FCC says the buffer of bandwidth is large enough not to cause any potential interference, the FAA has said that it will disallow the use of many instrument approaches and any aircraft systems that rely on radar altimeter data including autoland, head-up displays and enhanced vision systems “where 5G interference is possible.”

 BDL AD AP RDO ALTIMETER UNREL. AUTOLAND, HUD TO TOUCHDOWN, ENHANCED FLT VISION SYSTEMS TO TOUCHDOWN NOT AUTHORIZED EXC FOR ACFT USING APPROVED ALTERNATIVE METHODS OF COMPLIANCE DUE TO 5G C-BAND INTERFERENCE PLUS SEE AIRWORTHINESS DIRECTIVE 2021-23-12Example Aerodrome NOTAM for airports

Below is a Sample of a NOTAM covering instrument approaches:

IAP NOTAM against impacted approaches (SA CAT I / II, CAT II, III, or RNP AR): BDL IAP BRADLEY INTL, WINDSOR LOCKS, CT. ILS RWY 06 (SA CAT I AND SA CAT II), AMDT 13A… ILS RWY 06 (CAT II AND CAT III), AMDT 38A… RNAV (RNP) Z RWY 06, AMDT 1… RNAV (RNP) Z RWY 24, AMDT 1… PROCEDURE NOT AUTHORIZED EXC FOR ACFT USING APPROVED ALTERNATIVE METHODS OF COMPLIANCE DUE TO 5G C- BAND INTERFERENCE PLUS SEE AIRWORTHINESS DIRECTIVE 2021-23-12

Reportedly, additional NOTAMSs would be issued for private airfields with GPS approaches and helicopter operations requiring radar altimeters for hover autopilot modes, search and rescue autopilot modes and heliport instrument approaches.

Having said that, it is to be noted that neither the FAA nor the FCC has data from real-world airborne testing of radar altimeter-5G interference.

SOURCE(s)

COVER: Aviation Today

AirAsia India said on Wednesday, December 29 it has paid all its dues to the Airports Authority of India (AAI) and the airline was making all payments as per credit terms on due dates from September 2021.

It was reported earlier that AirAsia India's dues to the AAI increased from INR 1.47 crore in January 2020 to INR 3.58 crore in October 2021, as per AAI's internal documents.

''We have paid all our dues as per the contract with AAI. We are making all payments as per credit terms on due dates from September and there are no dues as on date.'Operational costs always increase in proportion to the number of flights operated and guests flown. In this period, from September to today, we have paid out INR 59 crore within the due dates as per the policy of the Airports Authority."Spokesperson, AirAsia India

An airline has to pay for air navigation, landing and parking among others to the AAI, which is under the Ministry of Civil Aviation, to use facilities at its airports, numbering more than 100.

India's six major domestic carriers -- IndiGo, SpiceJet, GoAir, AirAsia India, Air India and Vistara -- owed the AAI INR 2,306.59 crore as of January 1, 2020, the AAI documents stated. These dues swelled by 14.29% to INR 2,636.34 crore by October 31, 2021, the documents mentioned.

Many airports operated by the AAI have seen losses of around INR 7600 crore in the last three financial years. The number of airports in losses increased from 102 in 2018-19 to 113 in 2020-21.

The report cites statistics revealed by the Ministry of Civil Aviation (MoCA) and says that officials blame the shutting of airports during the lockdown and low traffic in recent times as the reason for these losses.

The top three airports with the highest losses in the last fiscal year are Mumbai airport – in which the AAI has a 26% stake – at INR 331.64 crore, Delhi airport – where AAI also has a 26% stake – at INR 317.41 crore, and Chennai at INR 278.63 crore.

AirAsia India is the AirAsia Group's brand for its subcontinent operations. The low-cost carrier commenced domestic services in June 2014 and plans to grow its route network to service all Indian metropolitan centres and a selection of tier-II cities.

AirAsia India is based at Bangalore Kempegowda International Airport, with secondary hubs in Delhi and Kolkata, and operates Airbus A320 equipment.

In December 2020, AirAsia Group and TATA Group signed an agreement for TATA Group to purchase 490 million AirAsia India shares from AirAsia Group for USD37.7 million. This will increase TATA Group's stake in AirAsia India by 32.67% to 83.67% and reduce AirAsia Group's stake in the LCC from 49% to 16.33%. TATA Group also plans to increase its stake in AirAsia India from 83.67% to 100% by the end of March 2022.

Arunachal Pradesh chief minister Pema Khandu said that the state’s first airport Hollongi is expected to be ready by August 2022 ahead of the scheduled completion date.

Khandu visited the construction site of the ambitious Greenfield Airport at Hollongi along the boundary with Assam and took stock of the work progress on the ground. It may be noted that the airport is supposed to be completed by November 22, 2022, as per the original agreement with construction agencies.

However, the central and state government authorities are pushing for its commissioning by August 2022. Once commissioned, the airport will be the first in the mountain state with a runway of 2300 meters eligible for landing and take-off of Boeing 747 aircraft.

Khandu expressed satisfaction over the progress on the ground despite the hurdles posed by the COVID pandemic during the last two years. He informed that of the 2300 meter runway, work on 1500 meters has been completed.

He further informed that keeping in view the possibilities of future expansion, the government has acquired about 500 Sqm of land beyond the runway while the Kokila River that runs along the airport boundary is being diverted.

“This is a dream project of the entire population of Arunachal Pradesh. We need to thank the central government for extending all-out support in fulfilling the dream that too on time. We also need to appreciate all the agencies involved in the construction of the airport who are working day and night to meet the deadline despite hurdles. The pre-fabricated terminal building will be in place by early 2022.The pre-fabricated terminal building will be temporary while construction of the permanent building will continue. Once the permanent structure is ready, the temporary structures will be utilized as cargo area.There are no external hurdles and work is going on smoothly. There are few internal issues that the agencies are sincerely working on."Pema Kandu, Chief Minister, Arunachal Pradesh

Later, the Chief Minister held an internal review meeting with all project stakeholders wherein he was informed that the Passenger Terminal Building of approx. 4100 Sqm will be designed such as to handle 100 arriving and 100 departing passengers at a time with scope for future expansion.

While the acquisition of required land (5 acres) on Assam side, shifting of 132 KV Power Gridline and diversion of Kokila river are under process about 74% work has been done on the 4-lane approach road of about 4 km to the airport, which will be completed by January 31 next year.

Pema Kandu, Chief Minister, Arunachal Pradesh

Project executioners informed that ongoing works were affected due to COVID 19, particularly the second phase of lockdowns imposed by the governments, unavailability of construction materials and parts of machinery in nearby areas and its restricted movement.

Work agencies couldn’t maintain sufficient manpower at the project site due to fear of COVID 19 break out, they said. Also shifting of Chakma habitats and High Tension Power lines along the proposed runway alignment got delayed due to the pandemic.