150 New Planes To Add This Fiscal Year To Fight Fare Turbulence

The limitations prevailing in the Indian aviation industry due to the grounding of Jet Airways should prove temporary as carriers are looking to add about 150 planes in this financial yea. This would mostly fly on domestic routes which was earlier planned to be 80 in number. 

The lack of planes has led to cancellations and surging fares, forcing the government to step in and seek ways of reining in ticket prices. At its peak, Jet Airways operated a fleet of 119 aircraft.

Of the total, IndiGo will add the most — 50. Vistara, AirAsia India and SpiceJet plan to induct more planes than earlier planned while GoAir will add 10. IndiGo’s deliveries will be as per schedule. “The airline would go with its predetermined schedule of about one aircraft a week this fiscal,” said an executive.

SpiceJet is stepping up capacity additions aggressively, having announced it would induct 27 planes, including five Bombardier Q400s aircraft. It now plans to induct 23 more, boosting new additions to 50. The airline will also have to make up for 13 Boeing 737 Max planes grounded after the worldwide safety ban on them.

Some of the slack will be picked up by grounded Jet Airways planes.

Meeting on Slot Allocation

“We are leasing Boeing 737 NG planes that were operated by Jet Airways and were grounded by lessors,” said an airline executive who did not want to be identified. “These planes can join the system much faster.”

AirAsia India, which was to induct seven planes during the current fiscal has decided to induct 14, five of them in July.

Vistara has informed the government it will induct 20 planes this year, up from 12 planned earlier, with the aircraft likely to start joining its fleet in June.

State-owned Air India plans to get its grounded planes airborne by October. “We have over 25 planes of our fleet grounded due to want of spares,” said an Air India official.

GoAir also has close to 10 planes on the ground and has been unsuccessfully trying to lease them out.

The carrier had asked Airbus last year to go slow on plane deliveries as it didn’t have enough pilots, said two people with knowledge of the development. The airline has, in the past month, hired 50 Boeing commanders from Jet Airways and is training them on Airbus planes, said a person close to the development, adding that it plans to induct more aircraft.

On April 18, the aviation ministry formed a committee with representatives from Directorate General of Civil Aviation, Airports Authority of India and private airport operators to allocate Jet’s slots to other airlines. The first meeting on slot allocation is slated to take place on Monday and slots are to be awarded to airlines for three months. “If Jet Airways starts flying and asks for its slots, they will go back to Jet Airways,” aviation secretary Pradeep Singh Kharola had told reporters last week.

Jet Airways Goes Through Fleet Crisis, Airlines Asked To Minimise Inconvenience To Passengers

Around 40 per cent of Jet Airways’ flights of 123 is grounded due to non-payment of lease rentals and lack of spares, said a senior official at the Directorate General of Civil Aviation (DGCA) said on Thursday. 

BS Bhullar, the director general DGCA said the aviation’s schedule is being monitored per month as its fleet count has been reduced to 70. 

 “Jet’s financial situation is well known. We are in constant touch with the airlines. We have told them to inform passengers about cancellations well in advance so that inconvenience is minimised,” Bhullar told reporters. He added that forward sales would not be banned as it can create a panic in the industry.

Cash-strapped Jet Airways had a fleet of 123 aircraft, including Airbus A330s and Boeing 737-800s, at the end of December 2018.

Jet Airways was forced to ground three more aircraft on Thursday due to non-payment of lease rentals, the airline said in an exchange filing. This has taken the total number of aircraft grounded on account of rental defaults to 28 including newly-introduced Boeing 737 Max. Other 25 aircraft are reportedly parked at different airports for want of service and spare as the full-service carrier faces its worst financial crisis.

According to DGCA sources, the airline has been compelled to cancel nearly 200 domestic flights every day, approximately a third of the daily schedule of 600 flights.

The beleaguered airline, which is looking for an investor to bail it out, is negotiating with lessors, the management said.

After announcing the grounding of four of its planes on February 7 for non-payment to lessors, the airline took another two aircraft out of operations due to similar reasons on February 23. On February 27 and 28, Jet Airways grounded seven and six aircraft, respectively, due to the non-payment of lease rentals. Later, two aircraft were grounded on March 1 and as many on March 2 and March 4.

According to sources, Jet’s equity partner Etihad Airways may be unwilling to infuse any funds in the interim in the cash-strapped carrier. The Abu Dhabi-based airline, which has a 24% stake in Jet, is believed to have decided to infuse funds only after the bank-led resolution plan (BLRP), which is being piloted by State Bank of India, is finalised and approved.

Meanwhile, Jet founder Naresh Goyal may be willing to step down as the chairman of the airline’s board. Since the BLRP’s finalisation and approval from all the stakeholders concerned will take time, the airline needs funds in the interim to pay its pilots, vendors and aircraft leasing firms.

As is known, the bank-led resolution plan includes infusion of funds, restructuring of debt and monetisation of assets. The BLRP has estimated a funding gap of around Rs 8,500 crore (including proposed repayment of aircraft debt of around Rs 1,700 crore) which will be met by an appropriate mix of equity infusion, debt restructuring, sale/sale and leaseback/refinancing of aircraft, among other things.

Once approved by all the required sections, lenders, led by SBI, will become the largest stakeholders in the airline. The stake of Goyal would come down to around 20-22% from the current 51%.

According to the monthly passenger data, Jet’s domestic passenger count was down 9% year-on-year during January while its market share fell to 11.9% – the lowest in at least five years – behind national carrier Air India’s 12.2%. 

Jet Airways Likely To Ground A Dozen More Aircrafts In March

Jet Airways, in the last two months has taken off 28 flight services and will ground about a dozen more next month due to non- payment of rent. 

Eight ATR turboprop jets, a Boeing 737 Max recently included into the fleet, a Boeing 777 and an Airbus A330 plane, and at least seven Boeing 737 NG planes are among the 40 odd aircraft that have been, or are in the process of being taken off the fleet, one of them told ET. Earlier, Jet had a fleet of 123 planes, which means it will have cut its fleet by close to a third by April. It grounded some planes after notices from unpaid aircraft lessors, some for lack of spare parts, and the remaining have been returned to lessors.

A Jet Airways spokesperson disputed the number of planes being taken off its fleet. “Jet Airways clarifies that your information on the airline’s number of aircraft that stand withdrawn from operations as on date, due to various listed reasons, is incorrect,” the person told ET. Jet said it has been keeping the regulator, DGCA informed about the developments with regard to its fleet. “Consequently, the airline has undertaken certain proactive adjustments to its flight schedule and is keeping its guests informed of these interim changes, offering them alternate choices, including re-accommodation on the airline’s alternate flights, in line with applicable guidelines,” the spokesperson said.

“Jet Airways regrets the inconvenience caused to its guests.”

In a statement to the BSE, the airline said it has grounded seven more planes “due to non-payment of amounts outstanding to lessors under their respective lease agreements”.

It had in two earlier statements confirmed the grounding of six aircraft.

Jet Airways partner Etihad Airways’ CEO Tony Douglas on Wednesday met the Indian airline’s top lender State Bank of India to discuss the resolution plan which includes enhancing its share capital, making lenders the majority shareholders and then issuing fresh shares to be subscribe by existing shareholders.

Besides Douglas, the meeting was attended SBI chairman Rajnish Kumar and its MD in charge of corporate accounts Arijit Basu. It is likely that the top brass at SBI wanted a sense of how much equity Etihad is ready to infuse in the troubled airline.

Jet Airways domestic pilots body, National Aviators Guild (NAG), on Wednesday deferred its proposed agitation from next month in view of the developments on the nation’s Western borders.

Jet Airways Offers 50% Off On Domestic And International Flights

Under its recent ‘Love-A-Fare’ sale, Jet Airways has waived a 50 per cent off on domestic and international flights. This will be applicable on base price of tickets in Premiere and Economy on some selected flights in both Indian and international network. 

This can be availed on both one-way and return tickets.

Customers will have to buy tickets between February 21 and February 25. International travel must start on or after February 21. Tickets for Premiere seats on domestic flights need to be bought at least eight days before departure for the travel on or after March 1. Economy seats must be bought 15 days prior to the departure for travel on or after March 8.

However, other charges like infant discount, refund charges, weekend surcharge and travel restrictions will be applicable.

IndiGo had also announced a sale on February 11 for domestic and international flights scheduled between February 26 and September 28, with cashback offers on select cards and banks.

Similarly, the two-day sale on full-service carrier Vistara began on February 12 and allowed passengers discounted prices for domestic travel between February 27 and September 18.

The announcement followed a similar one made by SpiceJet in which a passenger could book an all-inclusive ticket on a short-haul domestic route for as low as Rs 899 till the midnight of February 9.

This sale comes at a time when high competition in the aviation sector is pushing airlines to attract passengers with discounts and flights on new routes.

Jet Airways Facing Financial Difficulties Default On Debt Payment

The 25-year-old airline is facing financial difficulties and owes money to pilots, lessors and vendors. Intense pricing competition, a weak rupee and rising fuel costs weighed on the country’s airlines in 2018.

Cash-strapped Jet Airways said late Tuesday it defaulted on debt payment to a consortium of banks, prompting ratings agency ICRA to downgrade the carrier and sending its shares sharply lower. The payment of interest and principal instalment was delayed “due to temporary cash flow mismatch”, Jet said in a statement, adding that it was in talks with the consortium led by State Bank of India. The deadline for payment was Monday, December 31.

ICRA cut Jet’s long- and short-term ratings on Wednesday, citing the payment delays.

Timely implementation of liquidity initiatives, including equity infusion and a stake sale in the airline’s loyalty programme Jet Privilege, will be critical to the company’s credit profile, ICRA said.

Jet, the country’s biggest full-service carrier by market share, had a debt of Rs. 8,052 crore ($1.15 billion) as of September 30, 2018.

Jet and its second-largest shareholder, Etihad Airways, are in talks with bankers on a rescue deal that may involve the Abu Dhabi-based airline increasing its stake from 24 per cent at present.

The airline’s shares declined as much as 5.84 per cent in their sharpest intraday drop in over three weeks and were last down 5.27 per cent at Rs. 266.00, as of 2:33 pm on the NSE.

International Airport Transport Association Claims Indian Speedy Air Connectivity in Five Years

Ratifying the veracity of Indian airlines companies’, global airlines’ body, International Airport Transport Association (IATA) stated that the air connectivity grew the fastest at 114 per cent in the five-year period from 2013-2018 and there is “strong growth” ahead in terms of domestic passenger numbers though there are infrastructure challenges, according to global airlines’ body IATA. India is the fastest growing domestic aviation market in the world, IATA’s Chief Economist Brian Pearce said.

The country registered double-digit growth in domestic aviation market for the 50th consecutive month in October. An analysis by the International Airport Transport Association (IATA) showed that air connectivity grew the fastest at 114 per cent in the five-year period from 2013-2018. “Many of the markets where connectivity has grown fastest, unsurprisingly are in Asia — India (114 per cent), China and Indonesia…,” the grouping said in a presentation during the Global Media Day here.

As per the IATA, which is a grouping of around 290 airlines, connectivity is the “extent to which a country is integrated into the global air transport network”. In recent years, many foreign as well as Indian carriers have commenced flights to and from various Indian cities. About domestic passenger growth, Pearce told PTI that there is strong growth ahead but the challenge is with infrastructure and that airports are crowded.

“We need more terminals and runway capacities… We have seen concession (agreements) for many airports leading to large rises in airport charges,” he noted. On steps being taken in India to address the infrastructure issues, he said additional capacity is being put in place and some very good modern airports being built which is a “real positive”.

Noting that the cost of using those airports is high, Pearce said it is because the “economic regulations have not been strong as we would have hoped because concession agreements were made with very large royalties”. The lesson for the future is to provide good infrastructure because more is needed but at an affordable rate, he noted.

IATA’s Director (Global Airport Infrastructure and Fuel) Hemant Mistry said historically airport concessions have suffered from “unduly long and arbitrary concession lengths — these can be for the benefit of the government (higher concession fee) and the concessionaire (longer term returns). ? “We have seen many examples of very high concession fees where a large proportion of the gross revenue of the airport is diverted to the government and not necessarily re-invested back into aviation,” he added.

According to him, there are also examples where concessions are negotiated with fixed pricing over the concession term, which risks a situation where charges are not reflective of the service or infrastructure provided to the airlines and passengers.

Drowning Jet Airways Clutched to Lay-Off Employees to Cut Costs; Fired 16 More Employees

Jet Airways has resorted to laying off its employees in small chunks to reduce costs. The airways has again sacked 16 more employees, as reports went viral on Monday. These employees were working as ground staff in Jet Airway’s Kochi and Hyderabad offices, as per the sources.

Late last month, the airline had laid off 20 employees, including some senior-level executives from the in-flight services department. Prior to that, it reportedly had asked 15 managerial level employees from various departments, including engineering, security and sales, to leave the company.

The Naresh Goyal-promoted full service carrier, which has a fleet of 124 planes, has around 16,000 workforce.

“The airline continues to layoff people from various departments in small groups. It has already shut its city office in Hyderabad, which had 4-5 employees. Last week, the airline asked some of its employees working in Kochi office to quit. Together, it has retrenched another 16 people from these two offices,” said the source.

Jet Airways in its response said the company is optimising its resources in select cities, including re-deploying resources where needed, as part of its turnaround plan, which includes a comprehensive network review and capacity deployment. “Jet Airways has undertaken a series of initiatives to enhance the economic performance, efficiency and productivity for the long-term health of its business,” a Jet Airways spokesperson said.

The airline said as part of this strategy, which comprised a comprehensive network review, capacity is being moved from uneconomical and point-to-point routes to the airline’s hubs in Mumbai and Delhi for denser, more profitable and productive operations. “Consequently, the company is optimising its resources in select cities, including re-deploying resources where needed, for greater synergy with the revised level of operations,” the spokesperson said.

Jet Airways, which is partially owned by Etihad Airways of Abu Dhabi, posted a net loss of Rs 1,261 crore for the September quarter and has been defaulting on salary payments to some of its staff. This was the third successive quarterly loss for Jet Airways.

Last week, Jet Airways chief executive officer Vinay Dube had said the airline was in “active discussion” with various investors to secure financing to navigate through current headwinds and create long-term growth.

Jet Airways’ Wounds Festering; Decided to Transfer Jet Airways ops to Etihad Airways

Once a behemoth of Indian aviation industry, Jet Aiways seems to lose its shine in the wake of escalating debts, soaring fuel prices and receding profits. Another faction which is equally participating in the woes is InterGlobe Aviation Ltd and SpiceJet Ltd owned IndiGo, which is also facing similar challenges.

Heavily laden with debt of approximately 80.52 billion rupees ($1.14 billion) as of September 30, Jet Airways is hot to trot to crack an offset deal to mitigate the debts. Earlier it was vending off its six Boeing planes in auction and now it has resolved to transfer Jet Airways ops to Etihad Airways.

The airline has a market capitalisation of 35.03 billion rupees as of last close. The Tata conglomerate is now likely to be the potential white knight for the debt-laden company, but no proposal has been made yet.

Jet Airways Acquisition Can Be a Gambit to Tata Group

If the Tata groups conglomerate successfully acquires Jet Airways then it would translate into a big victory for the group, three industry experts said. The Mumbai-based conglomerate already has two airlines under its belt—Vistara and Air Asia India—which are run as joint ventures.

“The successful acquisition of Jet Airways will mean a quantum jump for Tata Group’s full-service offering, Vistara, which would otherwise take about 12-15 years to get to the position of its older rival,” said Dhiraj Mathur, partner and leader-aerospace and defence at PricewaterhouseCoopers Pvt. Ltd.

“Jet Airways has a lot of debt and liabilities which has to be resolved (by Tata group). But, if structured properly, it’s a great deal for the Tata Group,” Mathur added.

Vistara had a 3.8% share of the domestic market in September, while AirAsia India had 4.4%. In the same month, Jet Airways, along with subsidiary JetLite, held a combined market share of 15.8%.

Acquiring Jet Airways will help the Tata Group gain scale—its domestic market share will grow threefold to 24%. InterGlobe Aviation Ltd’s IndiGo, the current market leader IndiGo, has a market share of 43.2%.

A senior executive of a full-service airline said on condition of anonymity that a takeover of Jet Airways will help Vistara start international operations overnight.

“Jet Airways has an established international presence, along with a strong network into Europe and Asia. It also has a strong network of agents, staff and infrastructure which will help Tata group gain a large portion of the international market share (from India) overnight after the acquisition,” the executive said.

“Also, one of the main reasons why Vistara hasn’t been able to expand in India is the lack of slots at prominent airports like Mumbai and Delhi, which will no longer be a problem if the acquisition goes through,” the official added. Considering Vistara always aspired to fly international and Indian airlines earn a higher yield on international routes, as compared to domestic routes, the acquisition is expected to place Vistara as a premium offering on both domestic and international front. However, any deal between Jet Airways’ owner Naresh Goyal and the Tata Group is unlikely in a hurry as a range of issues, including Jet’s steep debt and liabilities, need to be sorted out first.

Jet Airways had a net debt of ₹8,052 crore as of end-September. While 60% of the debt is dollar denominated, its aircraft debt stands at ₹1,800 crore.

A lawyer, whose clients include a prominent no-frills carrier, said on condition of anonymity that deals between airlines can be lengthy in India, especially when it involves foreign partners. While Vistara is a joint venture between Tata Sons Ltd (51%) and Singapore Airlines (49%), Abu Dhabi-based Etihad holds a 24% stake in Jet Airways.

“It could take at least three to six months to materialize after the completion of due diligence,” this person said.

Tata Sons, the holding company of Tata group, said on 16 November that it is in talks to acquire a controlling stake in Jet Airways.

A Tata Sons spokesperson declined to comment to an email seeking insights into its plans for Jet Airways. A Vistara spokesperson did not respond to an email.