Govt puts off debt-laden Air India stake sale for now; to fund operations

The government is looking at turning around the company to ensure that it makes profits on an overall basis

The government has decided not to go ahead with Air India stake sale in an election year and will provide required funds for its operations, a senior official said on Tuesday.

The decision comes less than 3 weeks after the proposed 76 per cent strategic stake sale in debt-laden national carrier failed to attract any bidder.

Air India will very soon get funds from the government for its day to day operations and will even place orders for a couple of aircraft, the government official said.

The decision was taken at the high-level meeting convened by Union Minister Arun Jaitley yesterday. The meeting was attended by Piyush Goyal, who has been temporarily given the charge of the finance ministry, Civil Aviation Minister Suresh Prabhu, Transport Minister Nitin Gadkari and other senior officials of finance and civil aviation ministries.

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"The airline is posting operational profits. None of the flights goes empty. With all the cost-efficient mechanism in place, we will continue improving its operational efficiency. There is no need to rush in for disinvestment as of now," the official told PTI.

The government is looking at turning around the company to ensure that it makes profits on an overall basis before going in for listing.

"Certain conditions have to be met before listing a company. Once Air India fulfils those, we will go in for an initial public offering and subsequent listing," the source said.

According to Sebi norms, a company has to post a profit in previous three financial years before it can list itself in the stock exchanges.

"The focus is on improving operational efficiency. We will continue to boost employee morale, starting from the top level, to better the functioning of the airline. Funds would be provided as and when required," the source added.

The government had originally proposed to offload 76 per cent equity share capital of the national carrier as well as transfer the management control to private players. The buyer would have had to take over Rs 240 billion debt or the carrier along with over Rs 80 billion of liabilities.

However, the stake sale failed to attract any bidders when the bidding process got completed on May 31.

No-fly list: Govt proposes maximum 2-year ban on unruly flyers

Draft rules, a first of kind in the world, have three levels with progressively higher sanctions

Almost a month after the country was shocked by the visuals of a parliamentarian assaulting an airline crew member for not being able to provide a business class seat as it didn't exist, the government took steps to empower airlines to ban unruly passengers.

The centre on Friday released draft rules for a 'no-fly list' -- a first of its kind in the world -- for unruly passengers. The rules allow airlines to bar a passenger from three months to maximum two years depending on the intensity of the offensive behaviour. The government has placed disruptions from flyers into three categories -- level-1 will include disruptive behaviour such as physical gestures etc., level-2 will be physically abusive behaviour like pushing, kicking and sexual harassment, and level-3 is for life-threatening behaviour and damage to aircraft operating systems.

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Punishment for unruly behaviour will simultaneously depend on the category of the offence.

The corresponding time of grounding for offenders, would be three months for level-1 and six months for level-2, while level-3 will attract a ban of two years. The new rules will be open for public comments for a month, and will pass through stakeholders' consultation before being finalised.

"There is no other country in the world with a no-fly list based on safety. There are no-fly lists based on security where people are seen as grave threats and they are not allowed to fly. India is blazing a new trail in this regard," Jayant Sinha, minister of state for civil aviation said. Read more

Want Rs 2,500 tickets under UDAN? Please book in advance on popular routes

Shimla-Delhi flights are sold out but others are available much below the capped limit of Rs 2,000

Five days after Prime Minister Narendra Modi launched the “Ude Desh ka Aam Nagrik”, or UDAN, scheme from Shimla airport, Tushar Patel tried to book tickets from Delhi to the hill station. To his surprise, he couldn’t find the subsidised Rs 2,500 fare. Instead, the cheapest fare in May was Rs 8,049 and on some days, it was as high as Rs 15,090.

Travellers lapped up the cheaper tickets soon after the scheme was launched. “On Delhi-Shimla route, all tickets reserved under UDAN scheme are sold out until June end. What’s available now are few seats that have market-linked rates,” says CS Subbiah, chief executive officer of Alliance Air, an Air India subsidiary.

This is quite a contrast to the other three routes that are operational at present. If you were to take a round trip between Mumbai and Nanded, the fares are Rs 4,000 – below the cap of Rs 2,500 one way. But if you are flying between Hyderabad and Kadapa or Nanded and Hyderabad, you can get a return ticket even for around Rs 2,000.

Shimla stands out among all other operational routes because of the holiday season. “The city is one of the most popular holiday destinations in India, hitherto inaccessible to many tourists due to lack of convenient air connectivity. It is also a state capital. There is a huge unmet demand,” says Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.

The number of seats available on the route are much lower, too, because the airport is at a high altitude. "From Delhi to Shimla, the 42-seater aircraft can only carry 35 passengers. Read more

Jet Airways joins SpiceJet, Vistara, starts variable pay to save wage bill

Plan covers 100 execs; fixed pay at 80-85%, rest based on staff performance, firm's profitability

Jet Airways is introducing 15-20 per cent variable pay component for its top management as it looks to save on its wage bill.

The Mumbai-headquartered airline has a higher cost structure than other listed domestic airlines and is undertaking cost control exercises to remain nimble. The variable pay scheme will be applicable to around 100 senior executives of Jet Airways and is expected to result in annual savings of Rs 25-30 crore, an airline source.

While the fixed salary component will be 80-85 per cent, the remainder will be linked to employee performance and airline profitability. The senior executives will also not receive salary increment this year.

A Jet Airways spokesperson did not offer immediate comments.

Some of Jet's peers already have a variable pay scheme in place. Vistara and SpiceJet too have variable pay for its senior management. Air India a productivity linked incentive scheme which was a variable pay out in mid-1990s but the same was discontinued in 2012.

Jet Airways has a staff strength of around 15,000 and had a wage bill of Rs 2,316 crore in the first nine months of FY 17. Employee costs rose 26 per cent on a year on year basis for the period. The airline has around 2000 pilots on its rolls whose salaries account for nearly half of the wage bill. Read more

Going after Vijay Mallya? What about Rs 30,000 cr taxpayers lost in Air India

"What is the difference between Vijay Mallya who lost Rs 10,000 crore and Air India which lost Rs 30,000 crore? Bank money is lost (in case of KFA) and public taxpayer's money is lost (in AI's case)," asks Mohandas Pai, former Chief Financial Officer and HR Head of Infosys.

The only difference - Air India has a forgiving promoter - government of India who stood by the company despite the atrocious decisions taken by its management and those responsible for its growth and wellbeing. Read More.