SpiceJet: Not a smooth flight
After losing ground in calendar 2016, the stock of low-cost carrier SpiceJet has come back roaring in 2017, more than doubling over the past six months. A few factors have aided this rally. First, a dip in oil prices and strength in the rupee over the past four to five months that could reduce the fuel costs of airlines. Next, reports suggest that yields (average fares) that had been under pressure in FY-17 have been looking up. Also, SpiceJet placing big aircraft orders at the recent Paris Air Show helped the stock. So did the commencement on flights on the regional connectivity scheme (UDAN) routes. However, the stock slipped last week on an adverse ruling by the Delhi High Court in the share transfer dispute with the Marans, the erstwhile promoters of the airline. Despite this fall, the stock is still trading close to its all-time highs. Meanwhile, the airline’s financial performance slipped in 2016-17 due to higher costs and lower fares. Weak earnings along with the market rally has made the SpiceJet stock quite pricey. At ?124, it now trades at more than 17 times the trailing 12-month earnings, as against the average of about 10 times in the past three years. Investors can sell the stock, given its high valuation and likelihood of the company’s earnings staying weak. This is primarily due to huge capacity additions expected in the sector that could keep fares subdued. The cost benefits are also not a given in the medium-to-long term. Besides, the share allocation dispute with the Marans remains an overhang. Jose Calderon Authentic Jersey
Almost all Air India subsidiaries likely to post profit this fiscal year
All but one of Air India’s key subsidiaries will likely make net profits this financial year, said two senior executives in the airline, making it more remunerative for the government to sell stakes in these units than to entirely divest its ownership from the flagship carrier. Air India Express, the regional short-haul service of the airline, may post a net profit of about Rs 300 crore in the year to March 31, 2018: The ground handling unit and halfowned catering service AISATS would together post a net profit of over Rs 200 crore. Separately, the domestic regional arm Alliance Air will also turn in net profits this year, according to the executives. According to some informal calculations made internally, the combined valuation of Air India Express and the ground handling unit would be about Rs 12,000 crore, said one of the executives cited above SpiceJet, a low-cost carrier that is on a revival course, has a market capitalisation of about Rs 7,500 crore, while Jet Airways is valued at about Rs 6,700 crore. The sole money loser among Air India’s subsidiaries is the engineering services business. “Air India Engineering services would have sales of Rs 600 crore from Air India and only Rs 150 crore from third-party contracts. If the latter chunk reaches Rs 400 crore, it will break even,” said one of the executives cited above. The engineering services division carries out aircraft checks, including the advanced C checks, for Jet Airways and will soon do the same for SpiceJet from August, said the executive. It has applied for approval from the European Aviation Safety Agency for some crucial approvals, which could open doors for trebling of its revenue. But breakeven will take at least two years and profits even longer, the executive said. Marcus Cooper Womens Jersey
Joint ownership of AI with govt difficult proposition: IndiGo
Having a joint ownership with the government in Air India will be a “very very difficult proposition”, IndiGo’s founder Rakesh Gangwal said today. While virtually ruling out the possibility of running Air India along with the government, he also cautioned that it would be a “Shakespearean tragedy” if the national carrier’s international assets go to a foreign entity. Soon after the Cabinet gave its in-principle approval for disinvestment of Air India, IndiGo expressed its interest to acquire the airline’s international operations as well as Air India Express. In a detailed conference call with investors and analysts, Gangwal along with co-founder Rahul Bhatia provided their perspective on the bid for Air India and plans for low cost long haul international flights. “Our view is that a joint venture or a joint ownership with the government is at best a very very difficult proposition and we would not go down that path. “The government has owned and managed Air India for 50 years and is looking to divest of itself right now. One would even wonder if truly at the end of the day when the thinking is all done, whether the government itself would be interested in wanting a partnership,” Gangwal said. Air India, which is surviving on taxpayers’ money, has a debt burden of more than Rs 52,000 crore. DeVante Parker Womens Jersey
GST adds to engine woes, almost half of IndiGo A-320 Neo fleet grounded
Almost half the fleet of IndiGo’s Airbus A-320 new engine option (Neo) is grounded due to trouble with the Pratt & Whitney (PW) engines used on these planes. The low-cost carrier (LCC) currently has 22 A-320 Neos and nine of them are reportedly grounded due to engine issues. The implementation of GST from July 1 led to some confusion over the import of replacement engines which further added to the problem. In India, IndiGo and GoAir use the combination of PW engines on A-320 Neos. Due to constant trouble with these engines, the US engine manufacturer was replacing and/or rectifying them. “PW is facing this issue on the A-320 Neos globally. Due to this, it is unable to supply replacement engines at the required pace. Also, there are some changes in the modifications that were being carried out on the replacement engines.So, the result is that the airlines using the A-320 Neo with PW engines are suffering,” said a source. IndiGo spokesman Ajay Jasra said: “…we continue to face operational issues with the Neo engine…. While this has caused operational disruptions, both PW and Airbus are working to address the issues. In the meantime, we continue to receive the necessary operational and technical support including the provision of spare engines to help mitigate the operational impact on us.” “We also faced some issues this month in getting some engines cleared at the customs post the implementation of GST. However, the government has cleared the confusion and has come out with a notification stating that leased aircraft and engines are exempt from custom duty so we are hopeful that this problem is behind us now,” Jasra added. IndiGo has a total fleet of close to 140 A-320s, of which 22 are Neos. The engine trouble is being faced by the PW-powered Neos. A unit of United Technologies Corp, P&W’s A-320 Neo engines have been plagued with issues like slow engine startup times and erroneous engine software messages in the new engine. Globally till February 24, 2017, 42 PW 1100G engines (fitted on A-320 Neos) have been prematurely removed from aircraft due to different technical reasons. A statement by PW said: “PW, with the support of Airbus, is actively working with our customers in India and we are supporting them in their daily operations…. The PW PurePower GTF engine employs advanced technology and has been in operation for more than one year. It has more than 200,000 hours of passenger service and is utilized by 13 operators flying 250 flights per day to over 100 destinations on four continents.” Christian Dvorak Authentic Jersey
Air India’s most unusual baggage puts a spanner on Modi government’s big selloff plan
Indian Prime Minister Narendra Modi’s cabinet has signed off on a plan to sell all or part of Air India Ltd., a debt-ridden, state-run carrier with the most unusual baggage. The airline’s balance sheet includes commercial space near London Heathrow, land in Tokyo, Hong Kong and Nairobi, all bought during the heydays when the airline commissioned paintings by Indian modern artists and hired surrealist painter Salvador Dali in the 1960s to design ashtrays. Then there’s about $8 billion in debt, a money-losing airline operation, five subsidiary companies and a joint venture, a combined workforce of 27,000 and unions with a history of grounding the airline over work demands. Not surprisingly, selling even a minority stake in the loss-making, 85-year-old company isn’t going to be a cakewalk. At least one attempt almost two decades ago failed amid fierce political opposition. Modi’s government has yet to decide how the sale will take place, how much of the airline is for sale and, more importantly, what to do with the airline’s accumulated debt. Undercut by budget carriers like IndiGo and SpiceJet Ltd., Air India’s local market share has shrunk to about 13 percent from 35 percent just a decade ago. “To find someone who will buy Air India in full, with all its assets, subsidiaries and artifacts, and who will also take on the accumulated debt, is going to be very difficult,” said Kanu Gohain, a former chief of India’s Directorate General of Civil Aviation.“Taxpayer money has been going to this organization to feed inefficiency and incompetency. That’s the biggest liability.” An Air India spokesman declined to comment. Civil Aviation Minister Ashok Gajapathi Raju’s office didn’t respond to a request for an interview. In May, a month before announcing the sale decision, Finance Minister Arun Jaitley told the state broadcaster that money spent on Air India could have been used for education. What does Air India have to offer? Buyers may be attracted to the carrier’s overseas routes and landing rights at most global airports as well as its in-house engineering and ground handling services. The government is almost certain to dangle financial incentives to lure investors, said Jitender Bhargava, a former executive director at Air India. “You’re not in the market to turn away people,” he said. “You’re coming into the market to attract people.” One buyer has already stepped forward. On June 28, IndiGo, India’s biggest commercial airline, said it was willing to buy out Air India’s international operations, or even the entire airline business, the day the government approved the sale. IndiGo investors weren’t thrilled: The company’s stock tanked 8 percent in two days, wiping out half a billion dollars from the company’s market value. To allay concerns, the billionaire owners of IndiGo — Rahul Bhatia and Rakesh Gangwal — held a conference call on July 6, saying the budget carrier soon wants to start low-cost, long-haul flights, and the international operations of Air India would speed up its plans. An acquisition would give IndiGo immediate overseas routes and workers with experience, which otherwise would take a long time to replicate, they said. “We see Air India’s international operations as a canvas, a new sheet of paper,” Gangwal said. “The biggest asset sitting in there is these negotiated route structures.” Despite India’s lure as a potential future market, Air India has been “a bureaucratically-enforced mess,” and any serious bidder for the airline will demand a free hand in restructuring, which will involve job cuts and complete control over the carrier’s finances, said Robert Mann, head of aviation consultancy R.W. Mann & Co. in New York. “This would mean ‘hands off’ by a government that has never previously been able to control its burdensome interference in its airline industry,” Mann said in an email. “Nothing leads me to believe that this time would be any different.” Air India has been unprofitable since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. The company made an operating profit of about 1 billion rupees ($15 million) in the year through March 2016, primarily due to a slump in oil prices. It still posted a net loss of 38.4 billion rupees, according to the government. The national auditor said the company understated losses by 64.2 billion rupees in the three years through March 2015, an observation refuted by the carrier. Air India and IndiGo are facing fresh competition after the Indian ventures of AirAsia Bhd. and Singapore Airlines Ltd. started operations, jumping into a market where profit has proven elusive. While provincial taxes in the country make jet fuel the costliest in Asia, intense competition often forces carriers to sell tickets below cost. Mail Delivery Air India started as Tata Airlines in 1932 and later became state-owned. Founded by Jehangir Ratanji Dadabhoy Tata, it took off flying mail between Karachi in then-undivided, British-ruled India and Bombay. Once it turned commercial, the airline quickly became popular with its advertisements featuring Bollywood actresses, high-end champagne and Dali-designed porcelain ashtrays. As India liberalized the economy in 1991, private competition started coming in. An eroding market share coupled with the merger with Indian Airlines fueled the decline in Air India’s fortunes. In 2012, the government bailed out the ailing carrier with 300 billion rupees in funds, guaranteeing the carrier’s loans and promising interest payment on some debt. But its need for working capital exceeded the dole. Short-term loans spiraled on missed revenue targets amid a failure to monetize assets, an auditor said in a report this year. “Given Air India’s current mess and inefficient state, there’s hardly a queue of folks bashing down the door to squander good money after bad,” said Saj Ahmad, an analyst at London-based StrategicAero Research, “Whoever lands in bed with Air India will be lumbered with a debt-ridden partner that has no propensity to alter its course.” Jaromir Jagr Jersey
Global carriers, PE firms join race to acquire 24 per cent stake in Jet Airways
Global carriers Lufthansa and KLM-Air France, bulge bracket private equity funds including the Blackstone Group, KKR & Co and TPG Capital have joined the race along with US airlines Delta to invest around $200-250 million in India’s second largest airline Jet AirwaysBSE -0.14 % is looking to raise capital to fund operations, face growing competition amidst severe macro headwinds, said multiple sources in the know. Jet Airways, in which Abu Dhabi’s Etihad Airways owns a 24 per cent stake, has adopted a network strategy independent of its investor and has roped in JP Morgan to raise funds, including through a possible stake sale. However talks with the potential investors are not yet advanced and no binding offers has come in, the sources mentioned above cautioned. Indian rules allow 100% FDI in scheduled commercial airlines but foreign airlines, though, are barred from holding equity stake in Indian carriers above 49 per cent. With Etihad already on board, Jet only has limited headroom and can bring on board another strategic partner by selling up to 24% stake in the airline. With a current market cap of Rs 6,880.59 crore, a 24 per cent stake sale could help raise Rs 1651.2 crore ($256 million). “Jet Airways does not comment on speculation. As a listed entity, all material decisions are taken by the Company’s Board and duly conveyed at the appropriate time,” Jet Airways spokesperson told ET. Spokespersons of Blackstone, KKR and TPG and Lufthansa all declined to comment. The Lufthansa spokesperson added, “We would like to add that with a presence of over half a century, India is a strategic market for Lufthansa Group and we are committed to increase our offerings by introducing our latest and most innovative products and services and by providing unrivalled connectivity.” Mails sent to AirFrance-KLM did not generate a response till the time of going to press. GLOBAL CONNECT Analysts say, a transaction, if successful, will provide necessary firepower for Jet in its expansion plans as the deal is coming at a time, when Jet’s larger rival Indigo is negotiating with the India government to acquire shares of the country’s biggest carrier, state-run Air India, which the Modi-government plans to privatise. Jet’s net debt in FY17 stood at Rs 5937 crore ($920 million). The Jet’s second largest shareholder U.A.E’s Etihad may also infuse fresh capital into the company, preferring to stay invested. However, late last year Etihad Aviation Group sacked its CEO James Hogan, who led an expansionist strategy. With a new interim management structure in place, aviation industry watchers say the future role of Etihad in Jet is not clear. There has also been persistent industry chatter than it is not willing to capitalise Jet any further. “With the founding leadership of Jet Airways back in the driving seat, it has been the intention of Naresh Goyal to take back total operational, financial and management control of Jet Airways. Although the management ‘takeover’ by Goyal did take place nearly 18 months back, the option to find a buyer for 24 percent, which is nearly to the stake Etihad holds of the airline, clearly suggests Jet Airways’ intent to buy back Etihad’s stake,” feels Mark D Martin, Founder & CEO at Martin Consulting, an aviation consultancy firm. Goyal’s move, feels Martin, “clearly is strategic and potent since Etihad at the moment is closely reviewing its global airline investment in the wake of the recent Air Berlin judgement. So we believe Etihad opting for an exit option, might just be perfect timing considering Etihad’s global investment operational control meltdown.” Etihad however has clarified last week — following media reports that Jet Airways is in exploratory talks to sell a minority stake to Delta Air Lines — that it remains committed to its strategic partnership with its Indian partner that operates 257 services each week, each way between Abu Dhabi and 15 cities across India. STRENGTHENING EXISTING TIES? For international carriers like Lufthansa and Air France-KLM, both of whom already have commercial ties with Jet, an equity partnership will give them better access to the Indian market, which is not just the largest growing market in the world but also a market, where Middle Eastern carriers have higher market share than the European carriers. Jet Airways, through its domestic as well as international network, can also feed into the networks of these international carriers. Any such pact will be a big plus for Jet Airways too as it will give Jet Airways’ access to the wide international network of these carriers. Currently, Jet Airways is the second largest international carrier out of India with a market share of about 15%. The national carrier Air India leads the pack with a market share of 17% in terms of outbound traffic out of India. Jet Airways has recently announced strengthening its codeshare with Delta and Air France-KLM, which will enable Jet Airways access to as many as 43 European destinations via the airline’s European hub Amsterdam and 27 via Paris besides 34 in North America. Jet Airways also has codeshare arrangements with Lufthansa, which has a large number of codeshare flights with Air India, as the national carrier is the only Star Alliance member in the country. Lufthansa had, in the past, tried to rope in Jet Airways as the second Star Alliance member from the country but that could not take off after Etihad bought stake in Jet Airways. ET had first reported about Jet’s ties with KLM Royal Dutch on September 27, 2016, months before the airlines announced the deals. Even though PE funds traditionally stay away from a volatile industry like aviation, investors like TPG have mined the sector extensively across the world, being part of the consortium that bought Continental Airways in US. In India, TPG said investment banking sources, had explored investments in both Jet and Kingfisher in the past while JP Morgan’s PE arm had backed Ajay Singh when he took over the troubled SpiceJetBSE -3.31 %. Both KKR and Blackstone have backed air
Former promoter Kalanithi Maran seeks over Rs 2,000 crore compensation from SpiceJet
SpiceJet’s former promoter, Kalanithi Maran of Sun Group, has sought over Rs 2,000 crore compensation from current promoter Ajay Singh and the airline for allegedly causing losses by failing to honour contractual obligations. SpiceJet told ET “the question of damages does not arise”. The claim for compensation has been filed before an arbitral tribunal comprising retired Supreme Court judges Arijit Pasayat, Hemant Laxman Gokhale and KSP Radhakrishnan. The tribunal was created in end 2016 under orders of the Delhi High Court and is adjudicating on a share transfer dispute between Maran and Singh. Hearings before the tribunal are ongoing and are expected to conclude in two months. Maran’s Rs 2,000-plus crore compensation claim, people close to him said, is based on losses incurred because of SpiceJet’s alleged failure to issue convertible warrants and preference shares to him and his KAL Airways. They said if compensation was not forthcoming, Maran will seek restoration of the status quo ante on SpiceJet’s ownership. A SpiceJet spokesman, responding to ET’s questions, said: “We can’t comment on the specifics due to the ongoing arbitration… (but) the question of damages does not arise”. “The entire issue was subject to approval of regulatory bodies… this permission was also denied when the previous promoter was in control and had applied for the same permission,” he said. Maran, who owns the Sun TV networkBSE -1.25 % in Chennai, has hired Washington DC-based FTI Consulting, which specialises in estimating financial damages due to breach of contract, for the arbitration. FTI personnel are expected to testify before the tribunal later this week. One of the persons quoted above told ET the loss to Maran is calculable on the basis of 18.91 crore warrants issued at a conversion price of Rs 16.30, and SpiceJet’s current share price of around Rs 125. This person also said the airline was paid Rs 679 crore for the warrants and preference shares. “Neither has SpiceJet issued the warrants or preference shares nor returned the money,” he said. Sun Group chief financial officer SL Narayanan did not answer calls and text messages. In a July 3 order, the Delhi High Court asked SpiceJet to deposit a total of Rs 579 crore – Rs 329 crore in the form of “bank guarantee” by July 31, and Rs 250 crore in cash deposit by August 31 – in connection with the share transfer dispute. The court ruled that Rs 100 crore (Maran has claimed Rs 679 crore was given to SpiceJet) was not paid directly to the airline but was used as bank collateral. The persons close to Maran, who had moved the Delhi High Court last March over the share transfer dispute, said the Rs 679 crore was used to stave off closure of SpiceJet and pay off statutory liabilities. SpiceJet was forced to stop operations for a day in December 2014 due to a severe cash crunch. The SpiceJet spokesman told ET: “This amount was utilised to discharge statutory liabilities and discharge and release the previous promoters from personal guarantees/assets.” The February 2015 deal that saw Singh becoming SpiceJet’s promoter had Maran and KAL Airways, his investment vehicle, transferring their entire chunk of Rs 35.04 crore equity shares, equivalent to 58.46%, to Singh for Rs 2. Singh, a co-founder of SpiceJet, assumed the airline’s liabilities of around Rs 1,500 crore. NO CAPITAL INFUSION SpiceJet’s filings with the Bombay Stock Exchange (BSE) show there has been no capital infusion as of March 2017. SpiceJet responded by saying its operations have been “carried out efficiently and hence the company did not see any requirement for further funding”. Singh and his family currently hold 60.25% in SpiceJet; his shareholding was around 2% before Maran exited. SpiceJet had told the Delhi High Court too that lack of regulatory approval was the reason for not issuing warrants. BSE and capital markets regulator Sebi, the airline had said, had refused to grant approval on the ground that promoters of the company had changed. The court’s July 3 order, however, observed SpiceJet did not initiate any action to challenge the stand taken by Sebi and BSE. Spice-Jet’s plea is “feeble and ineffective”, the court had ruled. SpiceJet told ET that while it did not wish to comment on the court’s opinion, the “company actively followed up with BSE and Sebi on multiple occasions post Ajay Singh’s takeover”. Laken Tomlinson Jersey
Govt may sell Air India in parts to attract potential buyers
India is considering selling state-owned Air India in parts to make it attractive to potential buyers, as it reviews options to divest the loss-making flagship carrier, several government officials familiar with the situation said. Prime Minister Narendra Modi’s cabinet gave the go-ahead last month for the government to try to sell the airline, after successive governments spent billions of dollars in recent years to keep the airline going. Air India – founded in the 1930s and known to generations of Indians for its Maharajah mascot – is saddled with a debt burden of $8.5 billion and a bloated cost structure. The government has injected $3.6 billion since 2012 to bail out the airline. Once the nation’s largest carrier, its market share in the booming domestic market has slumped to 13 percent as private carriers such as InterGlobe Aviation’s IndiGo and Jet Airways have grown. Previous attempts to offload the airline have been unsuccessful. If Modi can pull this off, it will buttress his credentials as a reformer brave enough to wade into some of the country’s most intractable problems. His office has set a deadline of early next year to get the sale process underway, the officials said, declining to be named as they were not authorized to speak publicly about the plans. The timeline is ambitious and the process fraught, with opinion divided on the best way forward: should the government retain a stake or exit completely, and should it risk being left with the unprofitable pieces while buyers pick off the better businesses, officials said. Already, a labour union that represents 2,500 of the airline’s 40,000 employees has opposed the idea of a sale even though it is ideologically aligned to Modi’s Bharatiya Janata Party. JaVale McGee Authentic Jersey
IndiGo says Air India ‘very important’ to meet long-haul goals
IndiGo, the only carrier that has made a pitch to purchase Air India Ltd., sought to allay investor concerns about the budget operator buying the unprofitable national carrier, saying a deal would help speed up plans for long-distance flights. Spelling out the rationale for their interest in the highly indebted airline in a conference call with analysts Thursday, billionaire owners Rahul Bhatia and Rakesh Gangwal said IndiGo would gain access to workers and overseas routes through the purchase, which otherwise would take a long time to replicate. “Air India’s international operations would bring a very important element to our network,” IndiGo’s co-founder Bhatia said. “It will provide a rapid entry into restricted, and in some cases, closed international markets.” Bhatia and fellow co-founder Gangwal held the call to justify IndiGo’s interest after the company’s announcement to bid for Air India wiped out more than $500 million in market value for IndiGo, the nation’s biggest and most profitable airline. Surviving on a taxpayer bailout, Air India hasn’t made a profit for about a decade and has piled up debt of about 500 billion rupees ($7.7 billion). Shares of IndiGo’s operator, InterGlobe Aviation Ltd., have recouped most of the losses this week since the 8 percent two-day drop at the end of June. The stock rose 1.3 percent to 1,232.25 rupees on Thursday in Mumbai before the conference call. A combination with Air India would help consolidate IndiGo’s position as the country’s biggest airline with a domestic market share of 54.2 percent and a total fleet of 283 registered planes. For a successful bid, IndiGo will have to buy out either the international or the entire airline operations of Air India, without a partnership with the government, Gangwal and Bhatia told analysts. Economic Sense Even without a deal, IndiGo will look to start long-haul operations as it makes “fundamental economic sense,” said Gangwal, a former chief executive officer of U.S. Airways. Bhatia, a former travel agent, and Gangwal teamed up to start IndiGo, which has become India’s biggest airline in just a decade, luring customers with on-time performance, new aircraft, cheap fares and a tight grip on costs. Buying into inefficient businesses has a history of success, Gangwal said. It is “questionable” if United Airlines would have become one of the world’s largest airlines today if it hadn’t acquired Pan Am’s Pacific operations and London routes a few decades back, Bhatia said. American Airlines followed the same model in buying Trans World Airline’s London routes, providing a proven road-map for such an approach, he said. “IndiGo is a natural player to take advantage of the significant and lucrative international market opportunity that India offers,” Gangwal said. “It is about time that IndiGo enters the long-haul international market.” Fiscal Burden An Indian ministerial panel gave preliminary approval on June 28 to sell the national flag carrier, reviving earlier attempts to dispose of the state asset that has strained public finances for decades. Though Prime Minister Narendra Modi’s administration has given its consent, it has yet to decide on the contours of the sale — especially the fate of the debt. A committee had recommended privatizing the airline by possibly asking the buyer to absorb more than $3 billion of loans linked to aircraft purchases, a person with direct knowledge of the matter told Bloomberg last month. The uncertainty over a potential deal structure will be a near-term overhang on IndiGo’s stock, Citigroup Inc. wrote in a note to clients June 29. “If the deal does fructify, management will need to make significant efforts to replicate IndiGo’s operational efficiency at Air India, which will continue to be burdened by legacy issues,” Citigroup’s Mumbai-based analyst Arvind Sharma wrote in the note. IndiGo has made an annual profit since at least the year starting April 2009, compared with the combined $10 billion in losses for the Indian airline industry in about the same period. Gulf Carriers IndiGo has long advocated a single-aircraft-type model to bring costs under check, and has ordered 530 of Airbus SE’s A320 family jets, becoming one of the world’s top customers for the Europe-based planemaker. Gulf carriers like Emirates Airline and Etihad Airways PJSC have captured a large share of the Indian traffic on transcontinental flights. Another challenge IndiGo may face, if it manages to buy Air India, is having a mixed fleet. A potential buyout of Air India would throw Boeing Co.’s 737, 777, 747 and 787 jets in the mix. Air India, which is known for its Maharajah brand icon, traces its roots to Tata Airlines, founded in the 1930s by the then-patriarch of Tata Group, J.R.D. Tata. A member of the global Star Alliance, it has rights to fly to and land in most of the global airports, as well as a trained workforce of 27,000. Alex Cappa Womens Jersey
GST structure for airlines: What’s in store for economy, business class and lease rentals
With airlines in India doing brisk business over the past few years on the back of rising incomes and cheaper air tickets due to low oil prices, Goods and Services Tax (GST) is likely to impact air travel. If you are a frequent flier, you will witness effects of GST tax rates on your airfares henceforth. GST council has lowered the tax rate in economy class flight ticket to 5% from previous service tax of 6%. However, it increased business class tickets at a GST tax slab of 12% versus previous service tax of 9%. Moreover, airlines can only claim input tax credit (ITC) on input services for the economy class, while in case of business class they can claim ITC for spare parts, food items and other inputs excluding cost on aviation fuel turbine (ATF) as it falls under purview of GST. The government has also levied a GST of 5% on lease rentals paid by airlines. A major portion of the airline’s revenue is generated from economy class as this segment offers higher amount of seats. In India, airlines like Jet Airways, SpiceJet, Vistara and state-owned Air India offer business class seats. Ashish Shah and Jiten Rushi, analysts at IDFC Securities believe that migration to the GST regime would be largely neutral for the airline sector. In ICRA’s view, these rates changes are not material, and should not have any major impact on the air passenger growth. However, the lowering of tax rate on economy class travel is line with the focus of the Ministry of Civil Aviation to make flying affordable for masses. Jordan Berry Jersey