Airlines Deals

The Civil Aviation ministry on Saturday ruled out any immediate possibility of floating the IPO for Air India, saying its first priority was to successfully merge the foreign carrier with the Indian Airlines.

“The IPO can come later. This is not the best time to enter the market,” Civil Aviation Minister, Praful Patel, told newspersons after inauguration of the country’s first multi-modal transport system at Netaji Subhas International Airport here.

Patel said his ministry’s first priority was the merger of Air India and Indian Airlines.

“This is because we need bigger and stronger carriers. Over the last two years, there has been 50 per cent increase in traffic than that over the past 50 years.”

Stating that the merger would enable the two strong carriers to leverage their strengths, he said the synergie would provide a strong entity for Air India. “We need a strong entity before we can go to the market,” he added.

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A man once a prime suspect in the Air India bombing has won the right to limited participation in a public inquiry into the tragedy.

Ripudaman Singh Malik was granted intervener status yesterday by former Supreme Court judge John Major, the head of the inquiry.

In a brief written ruling, Major cautioned that Malik’s interventions will be limited to challenging “any evidence that directly and adversely affects his reputation.”

Any submissions by Malik or his lawyers will have to be made in writing, at least to start. They will have to apply for leave if they want to go further and participate in oral statements and examination of witnesses.

Malik and Ajaib Singh Bagri were acquitted last year — after an 18-month trial — of criminal charges stemming from the downing of Air India Flight 182 by a terrorist bomb off the coast of Ireland in 1985.

The bombing, believed to be the work of Sikh extremists campaigning for a separate homeland in northern India, took the lives of 329 passengers, most of them Canadian citizens of Indian origin or descent.

It was the worst terrorist attack ever mounted from Canadian soil, and the worst involving civil aviation anywhere in the world until the 9/11 attacks in the United States in 2001.

Malik’s lawyers had argued, in a written brief last week, that their client needed legal standing at the inquiry to protect his reputation and respond to any evidence that “may impugn his character.”

They also warned that Malik may want to ask for some evidence to be heard behind closed doors “where he anticipates prejudice to his reputation or other intimate matters.”

Major is required, under the inquiry’s terms of reference, to hear some evidence in private if it endangers national security as defined by the federal government.

He can consider other requests to hold closed hearings, but commission counsel Mark Freiman has noted it would be unusual to do so.

Major has granted full standing at the inquiry to seven organizations and individuals, including the federal government, Air India and a number of family members who lost loved ones in the bombing.

Another nine groups and individuals, including Malik, will be permitted to play more limited roles, Major has ruled.

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Price war in the Indian skies has taken its toll on market leader Jet Airways, which suffered a net loss of Rs 45 crore during the first quarter of current financial year, despite clocking a 25 per cent increase in revenue at Rs 1,680 crore.
Announcing results for the April-June quarter, a day after its Chairman Naresh Goyal received the Best Aviation Company NDTV Profit Award from Prime Minister Manmohan Singh, Jet said its overall financial performance was impacted by factors including “continued yield pressure in our domestic and international operations and an increase in fuel and other input costs”.

However, the premier private carrier reported pre-tax profit on domestic operations of Rs 11.8 crore.

“Loss before tax in our start-up international operations of Rs 71.3 crore resulted in an overall loss before tax for the company of Rs 59.5 crore in the quarter”, the airline said.

The airline said all its international routes were profitable, barring the London sector.

“We are addressing our London route profitability through a combination of passenger and cargo sales initiatives and network partnerships with other established airlines”.

Jet said the introduction of the second daily Mumbai-London flight completed its product offering on this sector, with convenient connections to Europe and North America as also the domestic network.

The other global routes the airline operates are Colombo, Kathmandu, Singapore and Kuala Lumpur.

The airline said the near-term outlook also remained difficult, despite the continuing growth of domestic and international traffic.

It said comprehensive profit enhancement programme was being executed through a combination of revenue enhancement measures like better yield management, higher cargo revenues and controlling costs, especially in the personnel, sale and distribution.

Maintaining that induction of high-salaried staff like pilots and engineers, including expatriates, along with a hike in staff training costs and normal annual wage increases had raised costs substantially, it said strict controls on all non-operational related recruitment were being implemented.

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Price war in the Indian skies has taken its toll on market leader Jet Airways, which suffered a net loss of Rs 45 crore during the first quarter of current financial year, despite clocking a 25 per cent increase in revenue at Rs 1,680 crore.

Announcing results for the April-June quarter, a day after its Chairman Naresh Goyal received the Best Aviation Company Award from Prime Minister Manmohan Singh, Jet said its overall financial performance was impacted by factors including “continued yield pressure in our domestic and international operations and an increase in fuel and other input costs”.

However, the premier private carrier reported pre-tax profit on domestic operations of Rs 11.8 crore.

“Loss before tax in our start-up international operations of Rs 71.3 crore resulted in an overall loss before tax for the company of Rs 59.5 crore in the quarter”, the airline said.

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Low cost carrier Air India Express finds itself with planes, but not enough pilots. The pilots seem to have flown away. The scarcity has gone so far as to stain parent Air India’s balance sheet, reports CNBC-TV18.

Air India Express pilots, or the lack of them, seem to be grounding profits. The airline more than doubled its fleet strength to seven aircrafts from three. But it could not increase the number of its destinations.

When it had three planes, last year, it flew to 36 Indian locations, now with twice as many aircrafts; it has added just two more destinations. That’s because it simply does not have the pilots to fly its aircrafts. Air India officials admit that a scarcity of pilots is showing on the financials.

Chairman, Air India, V Thulasidas said, “The loss cannot be quantified since we have an operational profit. But the profits could have certainly been more if we had operated.”

Separately, at parent company Air India, profits are plummeting. Sources say that profits could be about Rs 15 crore, down from Rs 97 crore that it posted last year. That’s partly because of Air India Express.

Chairman, Air India, V Thulasidas says, “It has to be marginal, the overall costs and the cost of oil has increased, we had to incur one-third more costs.”

Air India’s load factor has also dipped in the first half of the year. But it is confident that a new fleet will help it to regain market share.

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Four blue-chip firms - Rolls-Royce, Smith & Nephew, Shell and Kingfisher - posted second-quarter figures comfortably outstripping analysts’ expectations yesterday, helping spread positive sentiment across the market. The FTSE 100 index ticked up 52.4 points to 5,929.5.
Kingfisher rose 8.25p to 244.75p, despite divided opinion on the stock among analysts. Some, including the research team at Merrill Lynch, suggested yesterday’s sales figures marked the end of the DIY retailer’s recent woes. In a note entitled “Inflection point”, they noted the strong performance of the Screwfix division and the slowing decline of B&Q’s comparable sales from 8.8% to 2.4%.

“The inflection of B&Q’s like-for-like sales supports our view that the chances of a recovery should increase dramatically over the next 12 months and drive a material appreciation of the share price,” Merrill analysts concluded, rating the stock a “buy” with a price target of 270p.
In the opposite camp was Kingfisher’s joint house broker Credit Suisse, which holds a “neutral” rating on shares and a target price of 210p. “We already have a reasonable second-half sales improvement factored into our estimates and as yet we feel signs of consumer recovery are at best slight … This leaves the valuation continuing to look exposed in our view,” it said.

Elsewhere, there were less ambiguously encouraging second-quarter figures from Smith & Nephew - up 30.75p at 462.75p and top of the FTSE 100 leader board. Positive investor sentiment is seeping back into the stock after a tough nine months as management reiterated its confidence that product launches in the second half would fuel sales growth.

The group has just won regulatory approval in the US for its hip resurfacing product, designed for younger patients. A lot of bears in the stock appeared yesterday to be covering short positions. Analysts at Dresdner Kleinwort said: “We suggest investors start buying into the stock with an eye on its recovery over the second half and through 2007.”

Mining stocks were also in demand, with copper plays Kazakhmys and Antofagasta up 76p to £12.61 and 19p to 416.5p respectively. Copper prices rose 3% after riots at the Chambishi mine in Zambia and before a strike vote today at the Escondida mine in Chile. Sector peer Xstrata rose 107p to £21.41 as investors backed its intention to buy up to 5% of Canadian nickel miner Falconbridge as part of its takeover efforts.

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Network Advertising, Mumbai, has formally resigned from the Jet Airways business. It had been handling the creative and media duties for the airline brand since the past six years. As per certain industry sources, the size of the business is around Rs 50 crore, including both the brand’s domestic and international spends.

However, the agency has clarified that there are no specific problems/issues involved, and it was an amicable, mutual decision by both the client and the agency to part ways after six years of their association.

Vinod Nair, managing director, Network Advertising, says, “It has been a great journey with Jet Airways over the past six years. We are quite pleased about our role in making the Jet Airways brand what it is today.”

The end of this relationship indicates that Jet Airways will perhaps be on the lookout for a creative/media agency.

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Agitated Bharatiya Janata Party (BJP) members Friday forced adjournment of the Rajya Sabha over certain remarks made about former foreign minister Jaswant Singh in the context of the 1999 hijacking of an Indian Airlines plane to Kandahar, even as the presiding officer vainly pointed out that these did not exist on the house record.

As Deputy Chairman K. Rahman Khan called for resuming a short duration discussion on the July 11 Mumbai train bombings, BJP members were on their legs demanding that Congress’ Rajeev Shukla withdraw the allegations he had levelled against Singh during the debate Thursday.

Khan pointed out that Chairman Bhairon Singh Shekhawat, who was then presiding, had expunged the remarks even as Shukla Friday denied making any allegations.

The BJP members continued to demand an apology and party leader Sushma Swaraj stood up to say: “He (Shukla) said that those who were soft on terrorists take them in aeroplanes and give them money. He then turned to (former finance minister) Yashwant Sinha and asked ‘How much money was given’.”

Jaswant Singh had flown to Kandahar on Dec 31, 1999, with three top terrorists, including Jaish-e-Mohammad’s Maulana Masood Azhar, who were released in exchange for the passengers of Indian Airlines flight IC-814 hijacked to the Afghan city while on a flight from Kathmandu to New Delhi. He has said in the past that money had been demanded in exchange for the passengers but that this had been refused.

Demanding that Shukla withdraw his remark, BJP members threatened to stall the functioning of the house.

“He (Shukla) should be reprimanded,” demanded S.S. Ahluwalia, to which Khan retorted: “Where is the rule for reprimand? Shukla has already said he has not made any personal allegations.”

Shukla, who had stood impassively through this, requested permission to speak but was shouted down in the din.

Khan then quoted from the rulebook to say section 238 stated that no allegation would be made in the house unless prior intimation was given so that the concerned ministry could investigate the matter.

This cut little ice with the BJP members who threatened to advance to the speaker’s podium leading Khan to caution, “The presiding officer too has red and yellow cards.”

The BJP members then backed off, but continued shouting slogans like “withdraw the remark or we will not let the house run”.

Minister of State for Parliamentary Affairs Suresh Pachauri quoted from the book to say: “Under rule 156, if an allegation is made, it has to be proved, but when a member says no allegation has been made, where is the question of proving it?”

As the pandemonium continued, a visibly exasperated Khan stood up and adjourned the house, saying: “The members are not interested in discussing the Mumbai blasts.”

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Air Deccan, the premier low-cost airline in the country, has announced the release of two lakh tickets at low fares beginning at Rs499 (plus taxes). The tickets are available for travel between August 1 and 31, 2006 and bookings will begin on July 28, 2006.
Air Deccan has, meanwhile, upstaged government-owned Indian (Indian Airlines), its nearest competitor, to become the second largest airline in the country after Jet Airways. Air Deccan has a 21.2-per cent market share in June, up 1.8 per cent from May 2005 while the market share of Indian had dipped to 20.8 per cent.

Air Deccan has seen phenomenal growth in traffic, having flown over 5.8 million passengers since its inception in August 2003.

The airline has the largest network in India today covering 55 airports plying 265 flights a day. The airline currently operates a brand new fleet of 15 Airbus A 320 Aircraft with an average age of 1.5 years and 20 ATR turboprop aircraft. Air Deccan has placed orders for 96 new aircraft, which will be added to its current fleet in the next eight years.

This phenomenal growth has been attributed to the aggressive expansions undertaken by Air Deccan in the last three years of its operation.

“Air Deccan with its unconventional business model brought the luxury of flying to the common man in India. Dynamic pricing coupled with wide connectivity, rapid expansion of fleet and several other innovative steps enabled us in becoming the second largest airline in the country in such a short period of time. This clearly indicates the appetite that the country has for low cost carriers, and, if we were to go by the current rate of growth we are witnessing, it won’t be long before we become the largest people carrier with the largest fleet offering the largest connectivity and the lowest fares in the country. Amidst the various changes and challenges that we have been through, overwhelming passenger support is one aspect which has remained constant,” said Capt. G R Gopinath, managing director of Air Deccan

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GoaAir, the Wadia promoted low cost airline, plans to ink a deal worth Rs 22.25 billion with global jet engine manufacturer CFM International. The company will be acquiring 40 engines from CFM, reports Business Standard.

The airline is negotiating for two different types of jet engines for its Airbus A320 fleet. CFM International is a joint venture between Snecma of France and General Electric Company of the US.

GoAir Managing Director Jeh Wadia confirmed the negotiations were at an advanced stage. However, he also added that nothing has been finalised.

GoAir has recently signed a purchase agreement for 10 Airbus A320 family aircraft with an option for 10 more at Farnborough Air Show in London.

Meanwhile, GoAir has also firmed up plans to set up a maintenance, repair and overhaul (MRO) facility for aircraft engines, joining hands with an international partner.

The Wadia Group has recently signed an agreement with the engineering arm of Singapore Airlines, SIA Engineering Company, for MRO services for both narrow and wide body aircraft in India.

Launched in November 2005, GoAir operates a fleet of three Airbus A320s with 24 flights covering 13 cities including Jammu & Srinagar. The airline operates with a single class, 180-seat configuration and is planning to expand its fleet to 33 aircraft in three years.

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