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Even as policymakers in the government are toying with the idea of creating an aircraft leasing sector in the country, the experts, though positive, are of the opinion that key strategic issues need to be addressed before the initiative is taken forward.

According to the latest report prepared by aviation consultancy firm CAPA, the development seems significant as India which is amongst the fastest growing aviation market in the world has placed an aircraft order of more than 1,000 aircraft valued at around $50 billion, which in unit terms is third only behind the US and China.

Importantly, the vast majority of these aircraft will be taken on lease from offshore lessors. Further, around 30 years from now, India’s commercial airline fleet is expected to cross 5,000 aircraft, which will require a massive aviation eco-system including maintenance, crews, lessors, etc. thus prompting the government to think on those lines, the ministry sources reveal.

A recent study report published by the Market Research Future, the aircraft leasing market is projected to grow at a rapid pace. The market is projected to demonstrate an elevated growth by 2023, surpassing its previous growth records by posting a decent CAGR during the period 2016-2023. The global aircraft leasing market is expected to reach $ 62,221.8 million by 2023 at a CAGR of 4.75%.

As per CAPA, the leading global centres for aircraft leasing and trading include, amongst others, Ireland, Singapore, the US, Hong Kong and Japan. However, Ireland leads by a significant margin, supported by a comprehensive portfolio of Double Taxation (Avoidance) Agreements (DTAs) that minimise the exposure of aircraft leases to the purview of local taxation regimes. “This reduces costs for both lessees and lessors. Furthermore, to encourage such activity and the benefits they deliver to the local economy, several of these jurisdictions levy very competitive corporate tax rates on aircraft lessors. However, given the scale and value of such activity, even at concessional rates this brings in millions of dollars of tax revenue and supports thousands of jobs in the domestic economy” the report said.

Some of the questions raised by CAPA include whether Indian airlines will find it beneficial to lease equipment from an Indian lessor? “Sale-and-leaseback is the preferred structure, but it is possible that Indian carriers may not be comfortable with the level of disclosure required to execute such transactions in India. Airlines may be wary about the prospect of increased regulatory attention in India in the absence of clarity around the applicable framework.” the report questioned.

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Secondly, would a lessor be comfortable with the market risk of being able to serve Indian airlines alone? It will not be able to make competitive offers to foreign airlines, at least until such time as India renegotiates its DTAs. Should there be a downturn, equipment would either required to be sold or remarketed offshore with much lower returns due to the additional tax burden.

Source: DNA Money

India is amongst the fastest growing aviation market in the world has placed an aircraft order of more than 1,000 aircraft valued at around $50 billion, which in unit terms is third only behind the US and China.


Aviation industry: Indian aircraft leasing business may face hurdles before take-off

Lamborghini, the Italian luxury super car maker, has met its India sales target for till the first half of next year. Yet, Matteo Ortenzi, who recently took over as CEO of Asia Pacific region, is worried. It is frequently changing taxation policies that could prove as a dampener in the execution of his plan to double India sales in the next two years.

Ortenzi says high taxes in India are not letting the market expand and frequent policy changes making the prospective customers wait for the purchase even as he agrees that taxes are bound to be high on a luxury brand.

Lamborghini, which has over 40% market share in the niche segment, had clocked 26 unit sales in 2017.

As per the back-of-the-envelope calculations, a customer in India wanting to drive a super luxury car like Lamborghini has to shell out 158% on duties and taxes.

Further, addition of transportation and dealer charges, insurance and registration, etc, takes the final price 3.4 times of the actual price, the company executives said. The company which has Huracan and Aventador models in its portfolio&nbsp;recently introduced its latest SUV Urus in India starting at Rs 3.1 crore.&nbsp;

Lamborghini’s India head Sharad Agarwal described the high taxes as “taxes on taxes on taxes”.

Similarly, rival Ferrari which sells over 20 units annually in India launched its Portofino car in the country last month selling it at a price starting from Rs 3.5 crore. The car costs less than Rs 1.59 crore in the US.

Luxury brands such as Aston Martin, Ferrari, Porsche declined to comment for the story. An executive from one of the companies said that they have&nbsp; taken up the issue of high taxes and frequent changes in the policy with the authorities at every available platform and will continue to do so.

According to the industry insiders, luxury cars and bikes are considered to be an easy source of revenue generation for the government and levying taxes on it has been happening for long. Further, the government officials claim that it is done to protect the local industry. However, the reasoning has often been questioned.

US President Donald Trump recently even called India as the “tariff king” over the huge levies on American iconic luxury cruiser bike Harley Davidson.&nbsp;

Experts claim that the most recent changes happened last year in July post goods and services tax (GST) implementation, when luxury vehicles attracted base rate of 28% with 15% cess. Later, in September cess on large cars was hiked 5%, taking the total GST incidence to 48%, while that on SUVs was increased 7% to 50%.

Finance minister Arun Jaitley increased custom duty on CKD (completely knocked down) imports of motor vehicles, motor cars, motorcycles from 10 % to 15% in the Union Budget for 2018-19.

Also, custom duties were doubled on certain spare parts, accessories to 15%. As a result, the car makers had no option but to pass on the hike to the customers, making cars more expensive by up to Rs 10 lakh or even more, the experts said.

Source: DNA Money

Lamborghini, the Italian luxury&nbsp;super car&nbsp;maker, has met its India sales target for till the first half of next year. Yet, Matteo Ortenzi, who recently took over as CEO of Asia Pacific region, is worried. It is frequently changing taxation policies that could prove as a dampener in the execution of his plan to double India sales in the next two years.


'Taxes on taxes on taxes': Lamborghini says super luxury cars cost over 3 times actual price in India 

The government's decision to ask state-owned oil marketing companies (OMCs) to absorb Re 1 cut on petrol/diesel is expected to hit the latter's marketing margins severely, leading to cumulative losses of close to Rs 7,200 crore over a period of six months, according to industry executives and experts.

Senior OMC executives said the decision will surely hit their bottomline and slow down their expansion, which has been on a fast pace for the last few years. An executive said he had seen today's decision coming since elections are just months away.

The industry executives claimed the losses to be borne by each OMCs will depend upon the extent of their market share, with Indian Oil Company (IOC) being hit the hardest followed by Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd.

As per rating agency Icra, at an industry level this would lead to loss of margins of Rs 7,000-7,200 crore on auto fuel sales. K Ravichandran, group head &amp; senior VP, Icra, said the reversal of auto fuels price deregulation policy will hit the investor sentiment in the sector.

Abhishek Bansal, founder and chairman of currency derivative and broking firm ABans group, said this arrangement will make a dent of Rs 6,700 crore over next six months in OMC revenues. "This announcement was negatively received by OMC investors on reduced revenue and profitability concern. OMC share prices dropped drastically in the last 20 minutes of trading session," Bansal said.

According to an estimate, India consumes roughly 100 million litre of petrol and 275 million litre of diesel on a daily basis and the government's decision to cut prices would cushion the impact on consumers of rising crude oil prices which are at a four-year high of $86 per barrel.

While the OMCs till now had seen their profits plummeting in the past few years since the market was deregulated, the latest development has in a way brought the industry back to the "regulatory era", experts said. The central government deregulated petrol in 2010 and diesel in 2014. It last year allowed for daily pricing mechanism, whereby the fuel prices, based on international prices, get changed every day instead of a fortnight. However, the industry observers said the OMCs in the past not increased the fuel prices even for a couple of weeks, which incidentally coincided with elections in different states.

According to Petroleum, Planning and Analysis Cell, even in the backdrop of a very high base last year, total petroleum products consumption rose continuously for the last 12 months in a row, growing 0.8% in August 2018 and registering a cumulative growth of 3.9% during April to August 2018.

FLARING UP 
The losses to be borne by each OMC will depend upon the extent of its market share, with Indian Oil being hit the hardest followed by Bharat Petroleum Corp and Hindustan Petroleum.

Source: DNA Money

The government's decision to ask state-owned oil marketing companies (OMCs) to absorb Re 1 cut on petrol/diesel is expected to hit the latter's marketing margins severely, leading to cumulative losses of close to Rs 7,200 crore over a period of six months, according to industry executives and experts.


Petrol, diesel price cut: Happy now? For these companies, Modi govt delivers massive blow

Another $10 rise in crude oil to $95 per barrel at rupee level of 73-74 may take petrol price in India to Rs 100 per litre, according to the back-of-the-envelope calculations by analysts.

The benchmark Brent crude price surged to four-month high of $85 per barrel on Wednesday when a litre of petrol was sold for Rs 91.20 in Mumbai and diesel for Rs 79.89 per litre.

Abhishek Bansal, founder and chairman of currency derivative and broking firm ABans group, said if rupee rises to 75 a dollar and Brent remains at $85 per barrel, then petrol and diesel price may be in the range of Rs 91-95 per litre and Rs 80-84 per litre, respectively, in India.

"If the Brent price surges to $90/barrel and rupee stays at the current level of 73 per dollar, we could see petrol and diesel being sold in the same price range of up to Rs 95 per litre and Rs 84 per litre, respectively," said Bansal.

"In any of the scenarios, there is going to be a negative impact on our economy which will be burdened with additional imports costs, and further depreciation of rupee and rise in fuel cost looks unavoidable. Consumers can get relief only if government takes the charge and reduces some taxes on petrol," Bansal said.

The double whammy of rising crude oil prices and falling rupee is likely to intensify as clock ticks towards November 4 when the US re-sanction on Iran will come into force.

Refiners and analysts claim that with&nbsp;1.5-2 million barrel per day (mbd) exports of Iran likely to go out of market, it will not be a surprise if crude touches $115-125.

"We will get a clear picture on this by mid-November or early December when the quantity of oil availability with Saudi Arabia, Russia and other oil-producing countries gets clear," said a Delhi-based analyst. " If the Iran crude cut reaches two mbd then it will be a real tight situation," the analyst said.

While Korea and Japan have already halted their Iranian crude purchase, China and India also followed by cutting future imports. Sources claim that Indian refiners have purchased most of its oil requirement from Iran during earlier months of this year, and are not likely to make further purchase with the approaching deadline.

D Rajkumar, chairman and managing director of government-owned BPCL recently told DNA Money that his company is waiting for the outcome of the government level talks that are at present going on with the US.

As per the data with the industry, India's CAD expanded to $15.8 billion or 2.4% of GDP for the Q2 FY18-19; it may further rise towards 2.8% of GDP in FY18-19. In 2008 when the average price of Brent was around $120 per barrel the Indian crude basket was costing around Rs 5,000-5,500 per barrel while now it costs Rs 6,000-6,500 per barrel.

Source: DNA Money

Another $10 rise in crude oil to $95 per barrel at rupee level of 73-74 may take petrol price in India to Rs 100 per&nbsp;litre, according to the back-of-the-envelope calculations by analysts.


Petrol price set to hit Rs 100 mark! Check oil-rupee-dollar equation that will deliver shock to consumers

Homegrown auto major Tata Motors, which is seeing a turnaround in its fortunes, posted a 7% growth in its passenger vehicles (PV) segment, driven by demand for Tiago and Nexon. The growth assumes significance as the in past two months the overall sales in the auto industry have been subdued due to higher base effect from goods and services tax rollout last year, massive floods in Kerala and rising fuel prices and fall in rupee.

According to the Tata Motors executives, Tiago, which was launched in April 2016, has been able to sell over 1.7 lakh units so far and has been a money spinner for the company. It also helped the company bring in more individual owners to the fold than fleet buyers. Nexon, too, is managing to clock around 4,000 units in monthly sales for almost a year has beaten the cars in its category of rival companies. Mayank Pareek, president, passenger vehicles business unit, Tata Motors,&nbsp; said the growth for the overall PV industry is stressed with de-growth in all three months of the quarter. “Having said that, we grew at 7% on the back of continued demand of our new generation vehicles.”

As per the latest statistics available with Tata Motors, domestic passenger vehicle sales in September continued its growth trend at 18,429 units compared to 17,286 units, higher by 7% over last year.

In comparison, Maruti Suzuki India, which sells every second car in the country, recorded a 0.7% growth in its domestic PV sales. The company executives attributed the slump in demand on high base in September last year due to an early arrival of the festive season and some pre-buying in anticipation of GST rate revision. The volume pusher vehicles like Alto, WagonR saw a massive decline in demand in excess of 9% during the month.

Homegrown rival Mahindra &amp; Mahindra (M&amp;M) reported a 16% drop in its PV&nbsp; sales. The company sold 21,411 units during September as compared to 25,414 units a year ago. A Mumbai-based analyst said that though a 16% drop for M&amp;M is huge, the impact of its recent launches has not been captured in the figure. “It may get visible in the coming months”.

Even in August Tata Motors had posted a 24.98% jump in PV sales at 20,323 units. In the same month, MSI’s sales had fallen to 3.55% to 1,45,895 units and Hyundai Motor had posted a 2.76% drop at 45,801 units.

Toyota Kirloskar Motor (TKM), which sold 12,512 units in the domestic market during September as against 12,335 units in the year-ago period, a mere 1.43% growth.

N Raja, deputy managing director, TKM, said in a statement that customer demand in the auto industry has temporarily dampened owing to rising fuel prices, floods in different parts of the country and impact of currency weakness. However, it is likely to improve with the upcoming of festival season.

Hyundai Motor India Ltd (HMIL), the country’s second largest car manufacturer, registered domestic sales of 47,781 units in September, down 4.5% from 50,028 units a year ago.

Vikas Jain, national sales head, Hyundai Motor India, said, “Despite some ongoing market challenges, we expect this festival season will induce positive sentiments.”

Sridhar V, partner, Grant Thornton India LLP, said that increase in input and fuel cost, a high base of the previous year, and people postponing their purchase in anticipation of discounts during upcoming festival season have all contributed to slow demand in PV sales.

Source: DNA Money

Homegrown auto major Tata Motors, which is seeing a turnaround in its fortunes, posted a 7% growth in its passenger vehicles (PV) segment, driven by demand for Tiago and Nexon. The growth assumes significance as the in past two months the overall sales in the auto industry have been subdued due to higher base effect from goods and services tax rollout last year.

&nbsp;


Surprise! Tata Motors Tiago, Nexon sales jump, beat Hyundai, Mahindra

Aramco, Saudi Arabia’s state-owned oil company, is leading the race for a strategic stake in ONGC Petro Additions Ltd (OpaL), a petrochemical joint venture between ONGC, GAIL and Gujarat State Petroleum Corporation Ltd (GSPCL). Kuwait Petroleum Corporation (KPC) is the other major contender for the OPaL stake. Three sources in OPaL confirmed to DNA Money the ongoing talks with Aramco and KPC, but said nothing has been finalised. “So far Aramco is in the lead,” said a senior OPaL executive.&nbsp;

The strategic investor is expected to be offered about 26% stake in the company, which had commissioned a petrochemical facility in Dahej, Gujarat, last year, for an investment of Rs 30,000 crore. A market insider said the proceeds of the stake sale may be used by parent ONGC to repay the bank loans taken to buy the government’s 51.11% stake in HPCL, valued at around Rs 36,915 crore, earlier this year.

An Aramco spokesperson and KPC officials did not respond to a query over the deal.

As per last annual report of 2016-2017, ONGC holds a 49.36% stake in OpaL, GAIL 49.21% and GSPCL the balance 1.43%.

OPaL, which is an anchor tenant at the Petroleum, Chemicals and Petrochemicals Investment Region at Dahej in Gujarat, operates South Asia’s largest dual feed cracker with the capacity of 1,100 kTPA ethylene capable of producing a wide spectrum of petrochemicals through integrated downstream units.

The complex is strategically integrated with C2/C3 extraction unit of ONGC offering distinct competitive advantage with respect to feedstock securitisation. Apart from the domestic consumption, OPaL exports its products mainly to China, Vietnam and Pakistan.

Aramco, together with Abu Dhabi National Oil Company (ADNOC) hold 50% in the proposed refinery in Maharashtra and is also looking to venture into retail sales.

Aramco and ADNOC are expected to provide a significant amount of crude oil for the refinery which may start by 2025. The rest 50% stake will be held between Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL). However, the project is facing stiff opposition from ruling party BJP’s ally Shiv Sena.

Similarly, KPC, which is also looking to expand its presence in India, is keen to purchase a 25% stake in BPCL’s Bina refinery in Madhya Pradesh.

According to the analysts, the demand for petrochemicals, though is growing, had slowed down last year due to demonetisation.

The demand is likely to increase in the coming year on account of growth in consumer durables, infrastructure and automobiles and other segments.

Experts said after delay of a few years the Indian petrochemical industry is undergoing transformation.

First, BPCL with a small relative capacity of 220,000 metric tonne started operations in Assam. Subsequently, OPaL started the single largest cracker and derivatives facilities in India with a capacity of 1.4 million metric tonne. GAIL, an existing player expanded capacity by 400,000 metric tonne in early 2016. Reliance Industries, too, is expanding. It will become the net exporter once all the plants start operating at its full capacity.

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“All these changes will ensure consistent feedstock at more competitive costs in the long term,” an analyst said.

Source: DNA Money

The race for a strategic stake in ONGC Petro Additions Ltd (OpaL) is leading by Aramco, Saudi Arabia’s state-owned oil company.


ONGC Petro stake buy: Aramco leads; Kuwait Petroleum too in race

Putting together synergies of its global subsidiaries, Mahindra &amp; Mahindra (M&amp;M) on Monday introduced Mahindra Marazzo priced at a starting Rs 9.99 lakh. Mahindra Marazzo is a multi-utility vehicle (MUV) targeted at large families and businesspersons. Marazzo will compete with Toyota Innova Crysta and Maruti Suzuki Ertiga, two successful vehicles in the segment that has otherwise seen more misses than hits, say analysts. Marazzo means shark. It is derived from Basque language.

While Ertiga and Crysta clock in excess of 4,000 and 6,500 units a month, respectively, Datsun GO plus sells barely 350 units and Renault Lodgy has been able to reach 100 units a month.

With this launch, the maker of hugely successful Scorpio wants to hold on to its market share in the UV segment, which has dwindled in the past couple of years. Though the senior executives at M&amp;M did not specify the targeted sales for Marazzo, they claim that Marazzo together with a future sports utility vehicle (SUV) launch codenamed S201 will be able to sell around 9,000-9,500 units per month. The launch of S201 is expected early next year.

Also, the company is confident that Marazzo will not cannibalise any of M&amp;M’s existing products, as the targeted customers this time are different.

Anand Mahindra, executive chairman, M&amp;M, said that launch is a definitive moment for the company as it enters a new orbit. Talking to DNA Money, Mahindra said that Marazzo has been a huge leap of faith for his company in terms of successful efforts in global collaboration.

On M&amp;M losing market share in UVs, Mahindra said that the definition of SUV keeps changing with each passing day as some car makers just by making a few small changes here and there tend to place such products as SUVs. Also, the overall market size is increasing, he added.

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According to the M&amp;M executives, Marazzo took around four years in the making and was developed at a cost of around $20 million.

Engineering collaboration was between Mahindra Automotive North America and Mahindra Research Valley in Chennai. The design was done via collaboration between M&amp;M’s in-house team and its Italy-based subsidiary Pininfarina. Going forward, the company will continue to generate more products from such collaborations, the executives added.

Source: DNA Money

Putting together synergies of its global subsidiaries, Mahindra &amp; Mahindra (M&amp;M) on Monday introduced Mahindra Marazzo priced at a starting Rs 9.99 lakh. Mahindra Marazzo is a multi-utility vehicle (MUV) targeted at large families and businesspersons.

&nbsp;


'The Shark' Mahindra Marazzo to battle Toyota Innova Crysta, Maruti Suzuki Ertiga for supremacy

Naresh Goyal-promoted Jet Airways, which reported a loss of Rs 1,326 crore in April-June quarter, plans to sell and lease back “a portion” of the 16 aircraft it owns.

The airline management estimates the market value of these aircraft over $750-800 million.

The airline at present has a fleet 121 aircraft, comprising Boeing 777-300 ERs, Airbus A330-200/300, Boeing 737s and ATR 72-500/600s. Further, it has placed orders for 225 Boeing 737 MAX 8, of which three have been delivered to the airline.

Speaking during a conference call with the analysts, Amit Agarwal, CFO and deputy CEO of Jet Airways, referring to the monetary value of these aircraft said, “We have a clear intent to put a portion of these to sale and lease back. Clearly there is a huge equity sitting there,” Agarwal said.

As part of the turnaround strategy, the airline’s Board on Monday decided to bring cost-cutting measures, debt reduction and funding options, infusion of capital, monetisation of assets including the company’s stake in its loyalty programme. The airline executives claim the company will save an excess of Rs 2,000 crore due to cost reduction over the next two years.

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Further, the airline management said it reduced debt by around Rs 700 crore during March-June this year by way of lease incentives and fresh borrowing from the domestic banks. The airline management did not specify the amount it received as lease incentive. Ravi Chandran, senior VP of the airline, said the incentive will be spread over the period of lease. The carrier plans to repay around Rs 2,200 crore this year.

On the airline’s efforts to reduce its fleet maintenance costs, which increased by 20% in the latest quarter, Agarwal said with an important negotiation they will be in a position to save around Rs 650 crore from January 1, 2019. Similarly, due to another negotiation the carrier will be able to save around Rs 350-370 crore this year.

Source: DNA Money

Naresh Goyal-promoted Jet Airways, which reported a loss of Rs 1,326 crore in April-June quarter, plans to sell and lease back “a portion” of the 16 aircraft it owns.

&nbsp;


Jet Airways in trouble; here is how it wants to get back its mojo

Japanese automaker Mitsubishi, which has so far failed to make a mark in the Indian automotive market, hopes to give itself another chance with launch of couple of cars in the next few years.

According to Uttam Bose, MD, Hindustan Motors Finance Corporation (HMFCL), the manufacturer and importer of Mitsubishi cars in India, Mitsubishi is looking to make its first launch in the form of Eclipse, a mid-market sports utility vehicle (SUV). It will be pitted against Fiat Chrysler’s popular Jeep Compass that has sold over 25,000 units since its launch in July last year.

Bose said since Eclipse is mainly sold in the US markets, it holds good even for the Indian markets as far as emission (after BS-VI) and safety norms are concerned. “Not much work is required for introducing it in India,” Bose said on the sidelines of launch of fourth generation Mitsubishi Outlander in Mumbai last week. The management is eyeing the deadline of 2020 for the Eclipse’s launch, Bose told DNA Money.

Analysing the success of Jeep Compass, Bose said its manufacturer did maximum localisation before the launch and passed on the benefit of low price to the customers. “As India is a highly price sensitive market, this has given Jeep compass a USP,” he said.

According to the company executives, Mitsubishi is also looking to launch its second car Expander, a multi-utility vehicle (MUV), to compete with Maruti’s Ertiga, Toyota’s Innova or soon-to-be-launched Mahindra &amp; Mahindra’s (M&amp;M) Marazzo.

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Though Expander is already sold in Thailand, the Philippines, Indonesia and a few other markets, the India launch is at least two years away. A lot of changes are needed, especially in engines, before it could be declared fit for launch in the Indian market, the executive said.

At present, Mitsubishi sells three models - Pajero Sports, Montero and Outlander - in India. The company has struggled to succeed in India and had to be content with lesser product portfolio in comparison to its competitors.

Japanese automaker Mitsubishi, which has so far failed to make a mark in the Indian automotive market, hopes to give itself another chance with&nbsp;launch of&nbsp;couple of cars in the next few years.

&nbsp;


Mitsubishi Eclipse set to target Jeep Compass; Japanese carmaker may launch Expander too to beat India blues   

Leslie Thng, who was brought onboard by Tata Sons-Singapore Airlines joint venture Vistara as chief executive officer in October last year, has been mandated to strengthen the carrier’s domestic operations and take it international. In an interview with Shahkar Abidi, Thng talks about the airline’s future plans, introduction of ‘Lite’ fares and Regional Connectivity Scheme (RCS).

What are Vistara’s short term and medium term plans? 
We aim to start our international operations, subject to necessary approvals, before the end of this year, with destinations within the range of our Airbus A320neo aircraft. As we induct more aircraft in our fleet from the Airbus A320/A321neo family starting next year, we will densify our domestic network and expand on other international routes. Our wide-body aircraft are scheduled for delivery between 2020 and 2021, during which time we plan to further expand our international operations on medium and long-haul routes.

Why is Vistara’s aircraft order conservative in comparison to its peers? 
I wouldn’t call a commitment of 56 aircraft, including those on lease, which are scheduled to be delivered in a period of five years, conservative. In fact, it reflects a very strong growth ambition. Our approach to business from day one has been to achieve measured growth.

Vistara introducing Lite fares looks attractive, but doesn’t it come with the risk of diluting the USP of being a premium full-service carrier? 
Not at all. On the contrary, our new pricing model, Vistara Freedom Fares, simplifies flying for travellers. We believe it can be a game-changer in the industry. It is a novel concept that the biggest and the best airlines all around the world have adopted in response to customer needs. Ours, obviously, is unique and tailored for Indian travellers. Eventually, we’re only giving options to our customers, empowering them to pay for what they value. Lite fares address those customers who simply want the lowest fares and no other frills. And Freedom Fares is not just about Lite fares, which is just one of the fare types. Our Standard and Flexi fares offer lower and free changes/cancellation fees, respectively, and both come at very affordable add-on price.

Do you have any plans concerning the Regional Connectivity Scheme (RCS)? 
We support the government’s UDAN (Ude Desh Ka Aam Nagrik) scheme. However, due to our relatively small scale and size at present and absence of suitable aircraft to operate on routes under the scheme, we could not participate in it. But we do not rule out the possibility of doing so in the future.&nbsp;

With some airlines saying that current fares are unsustainable, do you see industry adjusting its capacity to raise the fares in coming months? 
Pricing is a function of supply and demand in the market. At Vistara, we price competitively and offer value-for-money products and fine experience at every touch point. Our capacity addition has been moderate and we have been following a strategy of measured growth.

Source: DNA Money

Leslie Thng, who was brought onboard by Tata Sons-Singapore Airlines joint venture Vistara as&nbsp;chief executive officer in October last year, has been mandated to strengthen the carrier’s domestic operations and take it international.&nbsp;

&nbsp;


Vistara to start international operations by end of 2018, says CEO Leslie Thng   

The Ministry of Civil Aviation (MoCA) is toying with the idea of adopting a globally prevalent ‘different owners and operators’ and ‘fractional ownership’ concept of aircraft operations in India. 
Despite being not illegal, the concept has not been able to take-off due to several issues, including taxation complexities.

Industry experts claim that the issue is of utmost importance, as India is all set to become the world’s second-biggest aviation market by 2038 with over 1 billion passengers expected to fly per year.

As per the concept paper being studied globally, the largest aircraft operators in general &amp; business aviation follow the models of aircraft management and fractional ownership services. “These two are the most popular and high-growth models. Notable examples of such operators are NetJets- 600 plus aircraft, Lux Aviation- 225 plus aircraft and Tag Aviation- 80 plus aircraft, which are spread across several state registries. There are many other examples reads a concept paper which is being studied by the MoCA along with other departments underneath it.

In sharp contrast, all of India has less than 450 aircraft (less than the largest individual operator-NetJets). Not only is our fleet size small, the growth rate of this fleet is also quite low in India (&lt; 2% per annum). The growth rate would get a big boost if the two models are facilitated to operate in India, the concept paper adds.

As per the model, the operator takes on all aircraft-related responsibilities, legal liabilities &amp; regulatory compliances, and ensures safe and compliant operations, leaving the owner to concentrate on core business, the concept paper adds further.

As per the analysts, the corollary benefits of having aircraft management and fractional ownership programs are huge.&nbsp;&nbsp;Some of which includes direct employment to skilled workers -pilots, engineers, technicians, airport staff, etc. Further, it allows the fleet base to increase, which in turn benefits indirectly-related industries like MRO, fuelling, ground services etc, to grow.

According to an industry source, the fractional ownership business in India has several policy hurdles, including that of owner-operator issues, taxation on buying and selling of fractional shares, depreciation spread across multiple asset owners, safety and efficiency of aircraft operations.

Captain Rajesh Bali, MD, Business Aircraft Operators Association (BAOA), a lobby group, claims that the concept of aircraft management companies has not really picked up in India due to lack of provision for different owner and operator. “Once this is allowed, a lot of private businessmen will buy aircraft and hand them over to an aircraft management company, which will take all the responsibility of managing and operating the aircraft and the owners can use the aircraft depending on their needs,” said Bali.

Bali adds that for the model to become operational, the government needs to rationalise the goods and services tax (GST) charged on the import of private aircraft and to find a model on the depreciation of the asset.

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“India imposes high and differential import duties on business aircraft based on their end use. For charter companies, it is 18% that rises to 28% for aircraft procured only for personal use. We would like rationalisation for both categories,” continued Bali.

Source: DNA Money

As per the concept paper being studied globally, the largest aircraft operators in general &amp; business aviation follow the models of aircraft management and fractional ownership services. “These two are the most popular and high-growth models. Notable examples of such operators are NetJets- 600 plus aircraft, Lux Aviation- 225 plus aircraft and Tag Aviation- 80 plus aircraft, which are spread across several state registries.&nbsp;


As India set to turn world's 2nd-biggest aviation market, Centre struggles with this 'foreign' concept

Luxury carmaker Audi is planning to increase its touch points in India to 100 by the year-end and is gearing up to launch an electric vehicle (EV) soon if the set-up is right. Rahil Ansari, Audi India’s country chief, in an interview with Shahkar Abidi, talks about the German firm’s plans regarding EVs, policy flip-flops, competition, among others.

What are the latest developments? 
Overall, we have launched the (updated versions) of Q5, RS5 and a few more products. A lot of other products will come in 12 to 24 months. Of course, the (new) A8 is awaited. There is a slight delay in getting this into India. While a lot of things are done and discussed centrally, we are in a position to launch an EV (electric vehicle) latest by 2020. We could also do it earlier if the set-up (infrastructure) is the right one. So the E-Tron that will be presented next month globally will be one of those cars that we could bring into India.

There is a lot of back-and-forth happening in the drafting of guidelines for EVs. So how are you geared up to launch an EV in the next couple of years? 
Initially for EVs, there was a policy planned. Then there was a communication that there is not going to be any policy. Now there is a go-ahead. In principle, I am in favour of a clear policy and guidelines for EVs. There are two ways; either you have a policy in place or you leave it completely open but you don’t get any policy in place afterwards. That will leave the playing field open. You don’t have a policy in place and you just leave it open. That’s a scenario which is okay for us. The worst thing that could happen is that you plan something, you are ready to roll it out and a policy comes into play that clearly opposes what you have been doing before.&nbsp;

Skoda, which is a part of the Volkswagen group, will be leading the expansion in the Indian market. Does it bring any changes for Audi, which is also a part of the Volkswagen group? 
It is business as usual. What I can confirm to you is that we have no change in terms of strategy for India. We are clear of what we want and what we are going to do in the market.

How big is your network? 
We have 39 dealers at the moment and more than 90 customer touch points. We will be reaching almost 100 touch points by the year-end, which also includes dealers.

What kind of a market are you looking at for the EV cars? 
We are looking at the key metros mostly - Delhi, Mumbai, Bengaluru, Ahmedabad, Hyderabad - because they are more promising. But the final decision will be made after considering the dealer partners as that will be an additional investment by them. It also has to make business sense to have setups there.

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What kind of numbers are you looking for EVs in the initial years? 
We are looking at a three-digit number which should come by the second year in operations. However, on an overall basis, we are pretty clear to reach 10,000 units in the next three to four years. We are looking to have a first-mover advantage in luxury EV space in India.

What are you doing to bridge the gap between the number one player in the luxury segment? 
There is nothing happening on those lines as I am not looking at the number one spot at an immediate stage. We are making sure that dealers are profitable and growing. It’s easier to buy market share in the short term. You can increase the number of cars but the problem is that for me it’s a short-term gain.

Source: DNA Money

Luxury carmaker Audi is planning to increase its touch points in India to 100 by the year-end and is gearing up to launch an electric vehicle (EV) soon if the set-up is right. Rahil Ansari, Audi India’s country chief, in an interview with Shahkar Abidi, talks about the German firm’s plans regarding EVs, policy flip-flops, competition, among others.


Rahil Ansari, Audi India chief on EVs, policy flip-flops, competition

On August 16, 2015, Naresh Goyal, chairman of Jet Airways, wasn’t his usual self while answering a query at the post AGM press conference in Mumbai. “We are feeding a lot of traffic to Abu Dhabi but we are not a feeder airline (of Etihad Airways). Our partnership with Etihad is a global one,” he stressed.

Three years later, the airline, in which Abu Dhabi-based Etihad Aviation Group holds 24% equity stake, has become the latest airline under the former’s umbrella alliances to go under financial strains after two of its European peers- Alitalia and Air Berlin - were declared bankrupt last year while the equity in Darwin Airline (Etihad Regional) had to be sold off. What is more, Jet Airways has slipped to a distant second position in the last few years since the JV came into play.

Analysts blame it on Etihad’s business strategy which to a great extent depends on its equity alliance partners feeding their passenger traffic into its base at Abu Dhabi, often at the cost of the expansion plans of partners. For Etihad, Jet accounted for nearly 50% of all partner seat capacity into Abu Dhabi last year.

Etihad, established by Royal Decree in July 2003 and wholly-owned by the Government of Abu Dhabi, adopted a business strategy of code-sharing and purchasing equity in struggling airlines around the world with an aim to quickly capture the markets and take march over rival Gulf airlines.

According to Mark Martin, founder and CEO of Dubai-based aviation consulting firm Martin Consulting, acquisitions do not have a high success rate in aviation industry unlike in other sectors like telecom. Martin, a former head of strategy at Spicejet, told DNA Money that the situation in which Jet Airways is currently in is partially the result of its partnership with Etihad, which forced it to become a feeder airline for its base in Abu Dhabi.

“This is exactly what happened with some of the other equity partners of Etihad,” avers Martin. He adds that further capitalisation and refinancing of the airline’s existing debt, apart from cost-cutting measures and change in strategies, will help the Indian full service carrier (FSC) to come out of the red.

Etihad has been on an investing spree since 2011. Apart from Jet, it also bought into a string of airlines — Air Berlin, Alitalia, Air Serbia, Air Seychelles, Virgin Australia, Air Serbia and Darwin Airline (Etihad Regional). While some of its investments have resulted in growth, few others like Air Berlin, Alitalia, Jet and Darwin have not been able to make a mark, the analysts claim, burning a $3.4 billion hole in its books over the last two years.

Insiders say that the first real sign of moving away from its earlier business strategy, Etihad in July last year sold off its stakes in Darwin Airline,adding that Jet Airways could be next in line. A report by leading aviation consultancy firm CAPA went on to the extent of claiming that Etihad would pull out of the equity by December, a charge denied by both Jet Airways as well as Etihad.

An Etihad spokesperson refused to comment on the alleged flaw in its business strategy. Neither did it comment on whether Etihad will increase its investment in Jet Airways or sell off its equity. “As a minority shareholder, Etihad continues to work constructively with the Jet Airways Board, promoter, and management team,” the spokesperson told DNA Money.

Change is partner preference? 
The CAPA report released in 2017 illustrates the rise and fall of Abu Dhabi as a hub for Etihad. During the two years of 2013-15, partner seat capacities grew 86%. But from 2015 to a planned capacity for 2017, seat capacity saw a 22% cut, indicating the change in priorities for the partnering airlines.

Many of Etihad’s equity partners, including Jet Airways, are changing their plans too. Over the past few quarters, Jet has focused on working with alliance partners over hubs in Abu Dhabi, Amsterdam, London and Paris, placing an increasing emphasis on its partnership with Air France-KLM and Delta, relative to that with its strategic investor, Etihad. Jet Airways had in November signed an agreement with Air France-KLM-Delta, offering connectivity to over 200 destinations in Europe and US which was announced to generate over $1 billion of revenue for the partner airlines.&nbsp;

The alliance is based on ‘metal neutrality’ business model, whereby the partner airlines become practically indifferent to which plane (metal) ferries the passenger. As per the plans, the partnering airlines will design their routes in synergy and are also likely to ink an agreement to collectively bargain for better fuel price, aircraft maintenance services, and sell each other’s tickets, etc.

An excited, Naresh Goel, chairman of Jet Airways, believes that the new deal would now give passengers more options as they can travel directly to Europe or via Gulf. He is quick to add that the relationship with Etihad would remain intact.

Vinay Dube, CEO at Jet Airways, says Indian aviation market is growing fast enough for everyone to have a larger pie of it. According to an estimate by Jet Airways, around 1.2 million passengers travelled between India and Europe in recent years which the new alliance expects it to increase to 1.7 million by 2019.

A senior Jet executive told DNA Money, “The exploration of our partnership with Air France- KLM Royal Dutch-Delta Airlines has offered the airline improved revenues which can be enhanced further with the right push.”

Turbulance in air 
According to industry observers, Jet Airways has been facing headwinds in the past few quarters. High fuel prices coupled with ‘unsustainable’ low fares, volatility in foreign exchange, stiff competition from low-cost carriers including Indigo, GoAir and Spicejet, increased maintenance and overhead costs, have all forced the airline to fly into losses. In the fourth quarter of 2017-18, the airline reported a net loss of Rs 1,040 crore in comparison to the Rs 583 crore profit in the fourth quarter of 2016-17.

Rating agency Icra had in May lowered credit ratings on the company’s short-term and long-term loan facilities citing weakened financial performance as the airline is unable to pass on the rise in jet fuel prices to customers. “The ratings downgrade considers the weakened operating and financial performance of the company because of its inability to pass on the increase in jet fuel prices to customers,” Icra said in its report. However, what surprised the industry was the airline’s move to defer announcement of its latest financial result ending June, giving way to several rumours and theories.

As per the experts, the carrier has also been losing market share. The latest figures available with the regulatory body, Directorate General of Civil Aviation (DGCA), reveal that the airline’s share reduced to 15.4% in the domestic market by end of 2017, from 15.6% at the beginning of the year. The drop in the market share has been drastic in 2018 with the domestic market share coming down to 13.9% in June.

The airlines’ shares have plunged around 16.5% since the start of this month after reports came out about airline not being in a position to survive beyond 60 days if cost rationalisation is not done. There were also reports that the promoter Goyal was even offering to lowering his stake in the company in order to raise some immediate funding. The fall has been around 67% so far this year, which is among the worst in airline business.

The airline has denied all the reports, while accepting that cost cutting measures are currently on.&nbsp;

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Trouble may be mounting for the airline as they seem to have come under the regulatory scanner for alleged lapses in timely disclosure of default risk.

&nbsp;

An excited, Naresh Goel, chairman of Jet Airways, believes that the new deal would now give passengers more options as they can travel directly to Europe or via Gulf. He is quick to add that the relationship with Etihad would remain intact.


Jet Airways flying through unprecedented turbulence; looks to stay in air, eyes painful measures

It seems Jet Airways has been in turbulence for long. The carrier, which initiated a salary cut for employees amidst a severe cash crunch, was tight-lipped about slashing salaries for at least last two months.

A question regarding salary cuts was raised during the management’s call with analysts on May 24 after the loss ridden fourth quarter financial results, but it refused to provide a specific reply, and instead claimed that they had managed to contain the manpower costs by improving productivity.

As per the analyst meet records, an analyst with a global investment service, referring to the salary cut asked the airline management as to what steps have been taken to reduce the cost on manpower side.

Responding to the question, Amit Agarwal, CFO and deputy CEO at Jet Airways, said that with regard to manpower, the annual inflation is around 5-6%.

Further, he said the carrier has been able to contain it by improving productivity.

The analysts’ concerns stemmed from the fact that a day earlier, on May 23, Jet Airways had reported a net loss of Rs 1,040 crore for the fourth quarter in comparison to the Rs 583 crore profit in Q4 FY17.

Like its rivals, Jet Airways too blamed the rising fuel price, as it constitutes around 45-50% of the total operational expenditure of the carrier for its precarious finances, apart from other factors like foreign exchange impact and one-time increase in maintenance cost of some of its aircraft.

Vinay Dube, CEO of Jet Airways during the same analysts call said that restructuring efforts are being done because at the end of the day the management do not want to be victims of the market.

Naresh Goyal promoted Jet Airways has been losing market share to its peers in the past several quarters, as the latest figures available with regulatory body Directorate General of Civil Aviation, indicating that it reduced to 15.4% in the domestic market by the end of 2017, from 15.6% at the beginning of the year.

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At 13.9% in June, the drop in the market share has been more severe this year.

The airline’s shares plunged around 7% since mid last week after reports came out about airline making salary cuts up to 15% for its employees, including expats pilots.

An analyst with one of the leading big four consulting firms when asked whether the industry can expect to see a spike in fares in the coming months on account of rising fuel prices said, “Since a lot depends upon supply and demand, there is a lot of capacity in the industry at the moment and it is increasing with each passing month. So to say whether there could a hike in fares in short or medium term would be highly speculative,” the analyst said.

Source: DNA Money

It seems Jet Airways has been in turbulence for long. The carrier, which initiated a salary cut for employees amidst a severe cash crunch, was tight-lipped about slashing salaries for at least last two months.

&nbsp;


Jet Airways salary cuts issue: Crisis brewing for quite some time

Rajesh Jain, a trader of chemicals from Mithapur, a sleepy town lying in between Dwarka and Okha in Gujarat, is a dejected man. He was ecstatic last year when the civil aviation ministry announced plans to connect the private airport in Mithapur to the economic hub of Ahmedabad and the rest of country under the Regional Connectivity Scheme (RCS), fondly called UDAN (Ude Desh Ka Aam Nagrik). A trip to Ahmedabad, which currently takes around 7-8 hours by rail or road, would have taken less than 40 minutes, by air.

But his dream airport travel has not taken off, yet. Other than a runway on which just over a dozen small charter aircraft belonging to Tatas and Coast Guards apart from casual private charters land in an entire year, there are no other facilities of an airport on the ground. Air Odisha (a joint venture between Gujarat State Export Corporation Ltd, Monarch Group and Capt Gopinath-founded Air Deccan), which has won the bid to start operations under RCS from the airport, has been told that the flights can begin to take off only after a year as a tall chimney is acting as an obstruction.

Mithapur’s economy primarily revolves around Tata Chemicals, with most residents depending on the company for their livelihood. The story began in 1939 when the Tatas took over the Okha Salt Works. Mithapur airport, privately owned by Tata Chemicals, is part of the 5,398 acres of freehold land obtained in the 1930s from the government of the erstwhile princely state of Baroda.

Though the Mithapur beach is famed for its serenity and pristine beauty, lack of connectivity and tourist infrastructure has come in the way of tapping tourists.

Darbhanga Airport in Bihar faces another challenge. The airport, operated by Indian Air Force (IAF), is equipped to handle military jet planes but not suitable for commercial aircraft. The authorities do not expect commercial planes to take off from this airport anytime soon as upgradation will require at least two seasons of rains.

Mithapur and Darbhanga are just two examples of around 50 such airports and heliports that are being upgraded for flight operations under the government-sponsored RCS project. There are close to 400 ghost airports in India, airports which have not seen a single flight for a long time. Interestingly, the rules under the new scheme mandated the operations to start within six months after the airport was chosen under RCS. The reality seems to be a little far off.

The project is financed by the Centre which contributes 80% of the VGF amount, while the remaining comes from the respective state governments. For priority areas like north-eastern states and union territories, the sharing ratio is 90:10. The center collects VGF fund of Rs 100 from each departing passengers at major airports.

Infrastructure bottlenecks 
According to the airlines participating under the RCS, issues related to infrastructure are the major headwinds. Shaishav Shah, director of Air Odisha and Air Deccan, two of the airlines that won the bid to operate under RCS, says there is an urgent need to improve the basic infrastructure at these airports, including night-landing facilities.

The absence of sufficient slots from major airports like Mumbai and Delhi is turning out to be a major handicap for the growth of RCS. In UDAN-1, Mumbai International Airport Limited (MIAL) and Delhi’s Delhi International Airport Limited (DIAL) could offer only about 10 of the 20 slots requested from each of the operators while under UDAN-2, these airports have not offered any slots.

“Even the slots that are being offered by these major airports are during the unearthly hours of 1am-4 am. Now tell me who will take flights at odd hours to fly to airports like Sholapur and others,” says Shah.

On their part, MIAL and DIAL cite ever-growing congestion at their airports as a reason for not granting more slots under RCS. What is more, a flight under RCS carries much lesser number of passengers but takes much more time to clear the runway (nearly 3-4 times), thereby affecting the operational performance of these airports.

Parking at major airports is another problem which RCS airlines are facing and have to park their aircraft at a different airport during the night which disturbs the economics of the operations of the airline.

A senior executive from one of the smaller airline alleges that even the paltry slots offered by the big daddies of MIAL and DIAL go to established airlines, leaving the new players in the lurch. The airport companies have, however, denied this charge. “We have taken up the matter independently with the airports as well as the ministry,” said the executive.

Most of the mainstream major airlines have sensed an opportunity in UDAN and are not shying away from the tarmac. Spicejet, which won a considerable number of routes, also wants to make use of amphibian planes, apart from its other smaller planes.&nbsp; Ajay Singh, promoter of the airline, has already announced putting up 100 such aircraft once the infrastructure and regulations regarding its use get concretised in the coming months.

Sudhakara Reddy, founder and national president, Air Passengers Association of India (APAI), says that there is a lot of ground to be covered in terms of creating the required infrastructure to achieve the ultimate objective of the government. “One major impediment that has come in the way of subsidy through viability gap funding (VGF) is the rise of fuel price. Also, the budgetary allocation of Rs 800 crore may not be sufficient to achieve the desired results.”

Civil aviation minister, Suresh Prabhu did not respond to a questionnaire sent by DNA Money.

Flying off UDAN 
Some of the airports like Kannur in Kerala and Shirdi in Maharashtra are trying to wriggle out of the UDAN scheme, putting the future of the scheme in jeopardy. They believe that they would not earn any revenues immediately from parking and landing charges and also end up providing security and other facilities free of cost or at a lower cost under RCS, thereby affecting their already weak bottomlines. With airports pulling out of RCS, there are chances that airlines which have already placed orders for aircraft may mount a legal battle on the airport as well as the government.

The lack of coordination between the Centre and states is evident from the fact that even after the board of Kannur International Airport Ltd (KIAL) decided to pull out of the scheme, the civil aviation ministry, reportedly unaware about the decision, announced the flight launch dates.&nbsp;“There are fears that more airports may try to pull out of the scheme,” says a ministry official.

Low entry barriers slowing down RCS?

Industry experts claim that though bigger players such as Jet Airways, Indigo, Spicejet and Alliance Air are able to use the benefits of economies of scale, smaller players like Air Odisha, Air Deccan and others are reportedly struggling to raise the required funds. And, they also struggle to place orders for fleet expansion, hire pilots, engineering and other staff, as well as manage the maintenance of their fleet. This may lead to mass cancellations of flights in the future.

Among airlines that are already operating flights under UDAN, some are already facing major cancellations. If insiders are to be believed, cancellations are as high as 60- 80% in certain non-peak months.

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Shah discards the allegations saying that they are in no need of raising funds at the moment. “However, maintenance issues do come up at times like any other airline that may lead to the plane getting grounded for repairs. But it gets corrected and again starts flying.” The maintenance issues, says Shah, will too get sorted out as they add another four aircraft in their fleet in next couple of months. At present, both the airlines together operate with four 19-seater Beechcraft B-1

Source: DNA Money

UDAN scheme is hamstrung by the scores of ghost airports spread across hinterland, whose inadequate infrastructure is stopping the growth of aviation sector&nbsp;&nbsp;


Shahkar Abidi