Tag Archives: Jet Airways

Shady players, aviation scam and the boom and bust of airlines in India

Lalit Shastri

The fate of now closed Kingfisher Airline, Air India’s huge debt burden and the latest grounding of Jet Airways raises several burning questions.

The merger of Indian Airlines with Air India and the reckless acquisition of aircraft by these airlines ahead of their merger and many related issues has put the former Union Civil Aviation Minister Praful Patel and many bureaucrats connected with civil aviation under the scanner of the Central Bureau of Investigation (CBI).

The probe by the principal investigating agency will eventually lead to the prosecution of those prima facie guilty but even as the enquiry against the “unnamed accused” is on, one should not lose track of the fact that the previous Congress regime, led by Manmohan Singh, was at the centre of the huge aviation scam.

  • Sunil Arora, now Chief Election Commissioner of India, after enjoying his tenure as Chairman/Managing Director Indian Airlines, kept quiet for long and before returning to his parent cadre, apparently to save his skin, wrote a letter to the Government alleging the Civil Aviation Minister’s interference.  In his letter, he had underscored that the then Civil Aviation Minister Praful Patel was forcing the airline Board to take financially unviable decisions. Arora had alleged that he was under immense pressure to comply with the Minister’s orders.
  • Arora was CMD Indian Airlines between 2002 and 2005. He also served as a joint secretary in the Ministry of Civil Aviation from 1999 to 2002
  • Syed Nasim Ahmad Zaidi was Election Commissioner of India from 2012 to 2015 and Chief Election Commissioner of India from 2015 till 2017. Earlier, he was Secretary in the Ministry of Civil Aviation and Director General of Civil Aviation. He was also in the International Civil Aviation Organization (‘ICAO’) for four years as resident Permanent Representative of India on the ICAO Governing council.
  • Along with other directors of Jet Airways, Zaidi presided over the grounding of the cash starved airline
  • Another ex-bureaucrat also a director in Jet Airways is Ashok Chawla. He was Secretary in key ministries of the Government of India, including Finance, Economic Affairs & Civil Aviation. He also served on the Boards of the Reserve Bank of India and the Insurance Regulatory and Development Authority. He has at different points in time, been India’s Executive Director on the International Fund for Agricultural Development and Alternate Governor for India at the World Bank & Asian Development Bank.
  • Vishwapati Trivedi, former Union Secretary, was Chairman-cum-Managing Director of Indian Airlines. He became joint MD of the new company after the merger of Indian Airlines with Air India. His stint (2006-2008) was cut short in the midst of allegations of corruption linked to upgradation of the airlines’ product portfolio in 2007. Trivedi also raked in huge incentive payouts and a large number of first or business class passages. When it came to drawing huge performance linked incentives, Trivedi was in league with a couple of other bureaucrats who have headed the airline.

Indian airlines which was a state monopoly went down when VP Singh grounded all A320s for a year-and-half after the Bangalore crash. This was compounded when Praful Patel merged Indian Airlines with the profitable Air India to ensure both nose-dived and Jet and Indigo benefited. The low fares came on low cost airlines and were at break even point. Of course the unsustainable North-East routes were compulsory. Air India now sits on a debt of about Rs. 40000 crores.

To understand the genesis of the decline, one would have to zoom in and take a closer look at the controversial decision that had been taken to bypass the letter of intent that had already been issued to procure Boeing aircraft for Indian Airlines and shift the choice of aircraft leading to the A320 purchase agreement at the initiative of Prime Minister Rajiv Gandhi in June 1989.

When Indian Airlines was in utter mess with the grounding of A320s in 1990 in the wake of the Bangalore crash, Naresh Goyal took advantage of the Open Skies Policy of Government of India to set up Jet Airways to offer scheduled air services on domestic sectors in India. Jet Airways commenced commercial operations on May 5, 1993.

Goyal had taken full advantage of the Government of India policy that allowed foreign direct investment in the airline sector and when Jet Airways was at the take off stage in 1994, 60 per cent of its shares were with Goyal while the remaining 40 per cent were held equally by Gulf Air and Kuwait Airways. After establishing his airline, Goyal managed to waive off all competition obviously by pulling strings at the Government of India level to alter the policy to bar foreign airline investment in any domestic carrier. This was not difficult for him considering his close association with top Congress leaders. Consequently no airline could take the same route as Jet Airways to establish itself. It is an entirely a different matter that even Jet Airways had to offload the foreign stakeholders when the GoI policy had been changed but by this time his airline had already established itself and there was no competition on the horizon till 2012 when the Indian Government took the decision to allow 49 per cent holding in a domestic carrier by a foreign airline and 100 per cent by an NRI.

This was the period when the airline sector was being treated as the grazing ground for politicians and bureaucrats. The trend continues even to this day.

The moment Praful Patel became the Civil Aviation Minister in 2004, during UPA-I led by Manmohan Singh, he had spearheaded the decision to merge the two airlines – Air India and Indian Airlines – and gave a huge order to purchase aircraft – both to Boeing as well as Airbus.

Of the eight Boeing 777-200LR acquired by Air India after Patel took over, five of these grossly under-utilised aircraft were sold to Etihad Airways for $336.5 million in December 2013 as a part of the “financial restructuring” exercise. After the Comptroller and Auditor General of India slammed the national carrier for selling the aircraft at a loss and below the market price, Air India took the defence that the indicative sale price was not available.

The merger of the two Public sector airlines has been criticised continuously by those in knowledgeable circles as one profit making airline was merged with a loss making airline. The propelling idea behind this decision was that there would be a common infrastructure. In the end, neither the personnel policies, nor the engineering policies or the routes matrix gelled and nothing worked.

On 11 January 2006, Air India announced an order for 68 jets – 8 Boeing 777-200LR, 15 Boeing 777-300ER, 18 Boeing 737-800 and 27 Boeing 787-8 Dreamliners. After the merger in 2007, Air India inducted the biggest member of the A320 family, the A321, to operate mainly on international short haul and medium haul routes. Simultaneously, Air India also leased the Airbus A330s to operate on medium-long haul international routes (ref: wikipedia).

There is another big question: When the loss making Indian Airlines could be merged with Air India, why Kingfisher, an airline with 100 aircraft that was flying both on domestic and important international routes, was allowed to collapse? This airline was going bad mainly because of Aviation Turbine Fuel (ATF) prices and global recession. The government could have taken over Kingfisher, removed Vijay Mallya as chairman and merged it with Air India – given the fact that so many jobs and what not was involved. Air India was having only about half of the total fleet of aircraft that was at Kingfisher’s disposal.

While the previous UPA Government allowed Kingfisher to collapse, it went whole hog to save Jet Airways by closing down Air India’s lucrative international routes to favour Jet Airways. Even the time slot on the domestic sectors were allegedly approved to favour private carriers. According to insiders, all this was done at the behest of Praful Patel, known in political circles as the “Maharaja of Gondia”.

Praful Patel got Arvind Jadhav- a 1978 batch IAS officer, as CMD Air India in 2009. He was known to be a blue-eyed boy of RV Deshpande, Minister for Large and Medium Industries of Karnataka. Deshpande and Patel are related.

During the corresponding period (August 2003 to 8 June 2009), high-profile bureaucrat, Rajesh Kumar Singh was initially Director and then joint Secretary in the Civil Aviation Ministry. At the Joint secretary stage, he took premature retirement from the IAS and opted for a lucrative assignment with a commercial airline. Here one can’t help questioning how bureaucrats who have held important posts in the Civil Aviation Ministry are given waivers to join the very airlines they had official dealing with.

The dust raised by the merger of the national carriers, has led to the registration of a series of FIRs by the CBI. The first case has been registered under Section 120-B read with 420 of Indian Penal Code and Section 13(2) read with 13(1)(d) of Prevention of Corruption Act, 1988 against Air India, “unknown” officials of Union Ministry of Civil Aviation and others to investigate the allegations relating to purchase of 111 aircraft for national airlines costing about Rs. 70,000 crore to benefit foreign aircraft manufactures. Such a purchase caused an alleged financial loss to the already stressed national carriers.

The second case has been registered under Section 120-B read with 420 of PC and Section 13(2) read with 13(1)(d) of PC Act, 1988 against “unknown” officials of Ministry of Civil Aviation, NACIL, Air India and private companies and unknown others to investigate the allegations of leasing of large number of aircraft without due consideration, proper route study and marketing or price strategy. It was also alleged that the aircraft were leased even while aircraft acquisition programme was going on.

The third case has been registered under Section 120-B read with 420 of IPC and Section 13(2) read with 13(1)(d) of PC Act, 1988 against “unknown” officials of Ministry of Civil Aviation, National Aviation Company of India Ltd. (NACIL) – the entity formed by the merger of Air India and Indian, Air India and other unknown private persons and companies to investigate the allegations for giving up profit making routes and profit making timings of Air India in favour of national and international private airlines causing a huge loss to the national carrier.

A Preliminary Enquiry has also been registered against unknown officials of Ministry of Civil Aviation and unknown others to enquire into the allegations relating to the issue of merger of the two national carriers -Air India and Indian Airlines – causing loss to the national exchequer.

Corporate lobbyist Deepak Talwar, who was extradited from Dubai on 30 January 2019 along with Dubai-based businessman Rajeev Saxena, was brokering aviation sector deals for his foreign clients during the UPA regime. It is alleged that he received kickbacks in his Singapore based company Asiafield Limited from Emirates, Qatar Airways and Air Arabia. During investigation into cases registered by the CBI, he may spill the beans that would expose the role of bureaucrats and politicians in the aviation scam that has plagued the airlines in India.

On the grounding of Jet Airways, AIR India CMD Ashwini Lohani has said:

“The closure of Jet even if temporarily is definitely a setback to Indian aviation. It is indeed a sad day for all those in the business of flying in the country to witness a fine airline closing shop. While sustained mismanagement definitely contributed, the fact remains that in the entire aviation eco-system, it is the airline that invariably remains at the receiving end while all other stakeholders make money. We have in the past witnessed many airlines shutting shop and it is time to appreciate that the razor thin margins which airlines are forced to operate with in a competitive environment, results in a scenario that encourages unsustainability. The issue has no easy solutions, yet a solution would need to be found.”

Lohani is right in saying “Airline operations world over is a razor thin business”. Riding piggy back on this razor thin business is the Government, especially through GST, the oil marketing companies, the airport authority, service providers and the airline honchos, they all stand to gain.

In order to make an airline a successful business proposition, you have to work with cost cutting, aviation Turbine Fuel should be declared as goods and airlines allowed to import ATF. What needs to be noted is that ATF is not under GST and each state levies huge taxes, cess etc in addition to central excise duties, making it very costly. User development fees should be rationalized, operational slots and routes given equitably and rationally.

Lohani, despite his close links at the top government level that has helped him get a second stint as CMD Air India, too has not done anything for policy. As far as mismanagement goes, private and government airlines’ management has had great perks, it siphoned off money into promoter or politicians’ pockets while letting airlines collapse. Air India is no exception to this rule. It gave up lucrative routes, operated politically sponsored routes, bungled in fleet acquisition etc. Air India could have become asset light and nimble which it did not. Jet operated in shady back rooms and milked the banks much like Kingfisher but Naresh Goyal got away giving controls into the hands of the SBI Chairman and the consortium of lenders to seal the bidding process for Jet Airways. Goel rejected offers from Tatas, Delta and Indigo that entailed his stepping down. His not doing so and his mismanagement led to jet’s downfall.

Also read: Audit reveals how the aviation sector has been mismanaged and exploited in India

Jet Airways is grounded as consortium of lenders refuse to fund critical services

Newsroom24x7 Network

Mumbai: Late night this past Tuesday 16 April 2019, Jet Airways was informed by the State Bank of India (SBI), on behalf of the consortium of Indian Lenders, that they were unable to consider its request for critical interim funding.

Since no emergency funding from the lenders or any other source was forthcoming, the airline would not be able to pay for fuel or other critical services to keep its operations going.

Consequently, with immediate effect, Jet Airways has been compelled to cancel all its international and domestic flights.

The last Jet Airways flight operated on Wednesday.

Through its emergency communique, Jet Airways has announced that now it shall await the bid finalisation process by SBI and the consortium of Indian Lenders.

In its response to the airline, the lenders have said, “The Expressions of Interest (EOI) have been received and bid documents have been issued to the eligible recip-ients today. The bid documents inter alia has solicited plans for a quick revival of the company. The bid process will conclude on 10th May 2019 … We are actively working to try and ensure that the bid process leads to a viable solution for the company.”

Jet Airways has assured that it will continue to support the bid process initiated by the lenders.

In the meanwhile, Jet Airways has informed all guests about the temporary suspension of flight operations via text message or email to the contact details listed in their bookings.

CLICK HERE for Message from Jet Airways CEO

Naresh Goyal

On March 25, when the Chairman of Jet Airways Naresh Goyal stepped down, the Board of Directors of the airline had approved the following:

The conversion of INR 1 of Lenders’ debt into equity by the issuance of 11.4 crore equity shares, in accordance with the RBI Circular of 12th February, 2018.
With this, the consortium of Indian lenders, led by State Bank of India (SBI), will become the majority shareholders of Jet Airways.

Reconstitution of the Board of Directors of the Company by:
Resignation of Promoter, Naresh Goyal, Ms. Anita Goyal, and Kevin Knight, nominee director of Etihad Airways from their positions on the Company’s Board.

The two nominees of the Promoter and one nominee of Etihad Airways will continue on the Board.

Two lender nominees will be inducted to its Board, subject to the receipt of requisite approvals.

As part of the Resolution Plan, the Lenders will provide an immediate interim funding support of INR 1500 crore to Jet Airways. The Company will also engage with payment intermediaries for release of trapped cash. The airline will leverage the funding to partly clear pending dues towards lessors, vendors, creditors and employees in a phased manner. The move will see Jet Airways re-deploy several of its grounded aircraft back into its network, helping renew many of the routes it had temporarily suspended, which will help restore normalcy of operations, aiding the airline’s long term transformation to continue expansion and to regain its position as a global player.

An Interim Management Committee (IMC) has been constituted to oversee the overall financial and operational performance of the airline under the overall supervision of the Board of Directors with the support of McKinsey & Co.

Three FIRs by CBI and how Air India went in the red

Lalit Shastri

The Central Bureau of Investigation on Monday, 29 May 2017, registered three cases (FIRs) and one Preliminary Enquiry against Air India, “unknown” officials of Union Ministry of Civil Aviation and others on orders of Supreme Court of India in response to an SLP by Centre for Public Interest Litigation.

This SLP (Civil) [No. 25545 of 2012] had extensively quoted and enclosed the observations of the CAG, Report of Parliamentary Committee on Transport Tourism and Culture dated 21 January 2010 and the Report of Parliamentary Committee on Public Undertakings dated 12 March 2010 in respect of the issues mentioned in the FIR/PE registration report.

 

Praful Patel (a 2004 photo)

The moment he became the Civil Aviation Minister in 2004, Praful Patel spearheaded the decision to merge the the two airlines – Air India and Indian Airlines – and gave a huge order to purchase aircraft – both to Boeing as well as Airbus.

Of the eight Boeing 777-200LR acquired by Air India after Patel took over, five of these grossly under-utilised aircraft were sold to Etihad Airways in December 2013 as a part of the “financial restructuring” exercise.

The merger of the two Public sector airlines has been criticised continuously by those in knowledgeable cirlces as one profit making airline was merged with a loss making airline. The propelling idea behind this decision was that there would be a common infrastructure. In the end, neither the personnel policies, nor the engineering policies or the routes matrix gelled and nothing worked.

Air india went down due to the ill fated decision of the merger of two organizations that were not destined to be, coupled with many other wrong decisions of the earlier regime. Ofcourse gross mismanagement at the senior management levels of the company played its part in the rapid downward slide too, but isn’t appointing senior management functionaries the function of the governments? – Ashwani Lohani, CMD, Air India

There have been a spate of articles on air india recently. While the grim financial scenario cannot be denied or wished…

Posted by Ashwani Lohani on Saturday, May 13, 2017

Patel, in his capacity as Civil Aviation Minister, was sitting at the apex of the decision-making process when Air India became a customer of Boeing 787 Dreamliner and it came into service with lots of glitches. Of course, there were also guarantees , for example, if you don’t fly it for a certain number of hours we are supposed to compensate you. But whether or not the guarantee was used is a million dollars question.

On 11 January 2006, Air India announced an order for 68 jets – 8 Boeing 777-200LR, 15 Boeing 777-300ER, 18 Boeing 737-800 and 27 Boeing 787-8 Dreamliners. After the merger in 2007, Air India inducted the biggest member of the A320 family, the A321, to operate mainly on international short haul and medium haul routes. Simultaneously, Air India also leased the Airbus A330s to operate on medium-long haul international routes (ref: wikipedia).

Significantly, Boeing had offered the next generation of 787 but that was politely turned down on the plea that the Government of India procedures would take another about 4 years and the straight message to the aircraft company was that it should just supply what has already been ordered. In this context, it would be pertinent to note that Air India Board did not have the authority to take decisions, whereas a private player could promptly decide and place an order.

As a consequence of gross mismanagement and spate of irregularities, there is now a burden of about Rs. 50,000 crore on Air India. Unless the government writes this off, it will be very difficult to bail out the national carrier.

There is another big question: When the loss making Indian Airlines could be merged with Air India, why Kingfisher, an airline with 100 aircrafts that was flying both on domestic and important international routes, was allowed to collapse? This airline was going bad mainly because of Aviation Turbine Fuel (ATF) prices and global recession. The government could have taken over Kingfisher, removed Vijay Mallya as chairman and merged it with Air India – given the fact that so many jobs and what not was involved. Air India was having only about half of the total fleet of aircraft that was at Kingfisher’s disposal.

While the previous UPA Government allowed Kingfisher to collapse, it went whole hog to save Jet Airways by closing down Air India’s lucrative international routes to favour Jet Airways. Even the time slot on the domestic sectors were allegedly approved to favour private carriers. According to insiders, all this was done at the behest of Praful Patel, known in political circles as the “Maharaja of Gondia”.

Praful Patel got Arvind Jadhav- a 1978 batch IAS officer, as CMD Air India in 2009. He was known to be a blue-eyed boy of RV Deshpande, Minister for Large and Medium Industries of Karnataka. Deshpande and Patel are related.

Air India Express a fallout of Vayudoot is another story…This airline is about to wind up as they are sending back their aircrafts which are on lease. All the pilots in this airline, who were on contract, have been absobed in Air India and are now flying the 787s.

CBI registers three FIRs against Air India and others

The first case has been registered under Section 120-B read with 420 of Indian Penal Code and Section 13(2) read with 13(1)(d) of Prevention of Corruption Act, 1988 against Air India, “unknown” officials of Union Ministry of Civil Aviation and others to investigate the allegations relating to purchase of 111 aircraft for national airlines costing about Rs. 70,000 crore to benefit foreign aircraft manufactures. Such a purchase caused an alleged financial loss to the already stressed national carriers.

The second case has been registered under Section 120-B read with 420 of PC and Section 13(2) read with 13(1)(d) of PC Act, 1988 against “unknown” officials of Ministry of Civil Aviation, NACIL, Air India and private companies and unknown others to investigate the allegations of leasing of large number of aircraft without due consideration, proper route study and marketing or price strategy. It was also alleged that the aircraft were leased even while aircraft acquisition programme was going on.

The third case has been registered under Section 120-B read with 420 of IPC and Section 13(2) read with 13(1)(d) of PC Act, 1988 against “unknown” officials of Ministry of Civil Aviation, National Aviation Company of India Ltd. (NACIL) – the entity formed by the merger of Air India and Indian, Air India and other unknown private persons and companies to investigate the allegations for giving up profit making routes and profit making timings of Air India in favour of national and international private airlines causing a huge loss to the national carrier.

A Preliminary Enquiry has also been registered against unknown officials of Ministry of Civil Aviation and unknown others to enquire into the allegations relating to the issue of merger of the two national carriers -Air India and Indian Airlines – causing loss to the national exchequer.

 

Domestic airlines register 23.17% growth in passenger traffic during 2016; Air India lags behind IndiGo and Jet Airways in market share

Newsroom24x7 Staff

aviation-sector-in-indiaNew Delhi: Domestic airlines in India registered a growth of 23.17% in passengers carried between January and September this year compared to the corresponding period last year.

Passengers carried by domestic airlines during Jan-Sept 2016 were 726.98 lakh as against 590.21 lakh during the corresponding period of 2015.

paxIn terms of Passenger Load Factor, Spicejet was on top during the two successive months – August (93.2%) and September (93.5) this year. Go Air was second with a pax load factor of 86% and 89.4%, Air Asia was third with a PLF of 83.3% and 82.8% and IndiGo was fourth with a PLF of 82.1% and 82.1% and close on heels in the fifth place was Jet Airways with PLF of 81.7% and 79.9% during this period. Air India, the national carrier performed way behind with a PLF of 77.7% and 79% in comparison with Spicejet.

pax-load-factor

When it comes to market share of scheduled domestic airlines during the year 2016, IndiGo was on top commanding a market share of 37%, 38.4% and 39.9% respectively during the three quarters this year. Air India was third in this respect behind Jet Airways.

market-share

During September 2016, a total of 728 passenger related complaints had been received by the scheduled domestic airlines. The number of complaints per 10,000 passengers carried for the month of September 2016 has been 0.9. The maximum passenger related complaints have been received by Air India (Domestic) and Jet Airways + Jetlite airline.

The airline-wise details are as follows:

passenger-complains

On-Time Performance (OTP) of scheduled domestic airlines has been computed for four metro airports viz. Bangalore, Delhi, Hyderabad and Mumbai. Vistara is ranked at the first place when it comes to on time performance with 89.6 OTP%, followed by Spicejet (88.8%) and Indigo (87.7%)

Airline-wise OTP at four metro airports for the month of Sept 2016 is as follows:

otp


Based on Report released by the Ministry of Civil Aviation on 19 October 2016.

Click here for the performance of domestic airlines for the year 2016