Touch Base with Indian A&D Industry

The government is considering a proposal to allow foreign airlines such as Singapore Airlines, British Airways and Lufthansa to pick up equity stakes in domestic carriers, but with riders.

It is preparing the ground for a major policy shift on foreign ownership in aviation. Government sources say foreign airlines may be allowed to own a 20-25% stake in local carriers, but their role on boards and in the management would be limited.

The civil aviation ministry had, in the past, argued that allowing larger foreign airlines to own stakes in fledgling Indian carriers could cause harm to the domestic aviation sector.

“Things have changed. Earlier, only one Indian airline operated internationally. But now, three domestic carriers fly to foreign destinations. Our carriers have grown in size and scale in three to four years’ time. We don’t think the earlier concerns are relevant. If foreign telecom companies can buy stakes in Indian telecom companies, why can’t foreign airlines pick up stakes in domestic airlines?” a government official asked, on the condition of anonymity.

Click for complete article

Iconic business strategist Ram Charan is boarding Capt GR Gopinath’s start-up logistics company Deccan Express as an advisor. The new
venture is expected to kick off in May next year with a fleet of six cargo aircraft connecting 14 locations and supported by a trucking service that will reach out to 68 places across the country.

“Ram Charan will be on the company’s advisory panel, guiding the CEO and operational team every quarter. We are gearing up to launch services in May-June, with a fleet of three Airbus 310s and three ATRs having 14 air touchpoints. We will be the largest and double the size of existing industry players on day one,” Capt Gopinath, chairman & managing director, Deccan Express Logistics, said. Three more ATRs will be added to the fleet subsequently.

Click for complete article

Indian aviation industry may be going through turbulent weather, yet experts see a growing potential for the maintenance, repair and o
verhaul (MRO) segment of the industry, with projected revenue of $1.07 billion by 2013.

Many companies, including Boeing in a tie-up with the state-run Air India, have announced joint ventures in MRO business and others are waiting in the wings for the government to address some tax issues to jump into the market, the experts added.

Speaking during an MRO Asia symposium here, C.S. Tomar, vice president of engineering and maintenance for Kingfisher Airlines, said the MRO market in the country was currently valued at $405 million with a potential for $1.6 billion by 2018.

"It makes economical sense for us to set up an MRO facility," Sitham Nadarajah, vice president for technical development with Jet Airways, told IANS. "With volumes increasing, we will be looking at D-checks for narrow bodied aircraft like Boeing-737s."

The D-checks are done on aircraft every four-five years, during which the aircraft is completely stripped, checked and then restored.

Click for complete article

Indian carriers, buffeted by softening demand, mounting losses and high jet fuel prices, are resorting to job cuts and reducing capacity to stay afloat.

Carriers have halted expansion plans and an alliance of the country’s top two carriers, Jet Airways and Kingfisher Airlines, is looking to return 14 narrow bodied planes.

Discount carrier SpiceJet cut 19 daily flights of its 117.

Kingfisher said it would reduce the salary of 50 trainee co-pilots, while state-run Air India plans to offer 3-5 years unpaid leave to 15,000 employees in non-core operational areas.

Kingfisher and Jet set up an alliance on Oct. 13 for code sharing, sharing of ticketing, ground services, fuel management, crew training and utilisation.

Click for complete article

A global survey by SITA has found that Indian travellers use the web more often for flight bookings and check-in than others. The survey also found that Mumbai leads six of the world’s busiest airports when it comes to web check-in ahead of Atlanta with a score of 19.3 per cent, as compared to the latter’s 18 per cent.

SITA, a specialist provider of information technology (IT) solutions to airlines and airports said there is overwhelming evidence from passengers surveyed at six of the world’s busiest airports across five continents that self-service is fast becoming the norm for passengers from Mumbai to Atlanta.

The first ever global survey to look at use of Passenger Self-Service at a major Indian airport, Mumbai International, has found that Indian travellers use the web more than often for flight booking and check-in.

Click for complete article

The technology-driven Indian aerospace sector would generate around $30 billion in offsets opportunities in India in the coming years, according to Indian Air Force (IAF) chief, Air Chief Marshal Fali Homi Major.

The India Strategic show daily for the India Aviation 2008 released here Tuesday quoted the air chief as saying that the IAF was under an unprecedented "transformation" requiring an investment of around $100 billion for aircraft, equipment and infrastructure over the next couple of decades.

Under the Defence Procurement Policy (DPP), first enunciated in 2006 and fine-tuned earlier this year, 30 percent of the value of all defence contracts has to be reinvested in the country.

The IAF has already inked a $1 billion deal with US aerospace major Lockheed Martin for purchasing six C-130J transport aircraft. In addition to this, it is evaluating bids for 126 combat jets in a deal that is valued at around $10 billion.

Click for complete article

India’s aviation industry has just a 2% share in the $470-billion global industry, but accounts for a third of its total losses. Blame the fuel cost volatility and high capital expenditure.

If the market turbulence lasts longer, domestic carriers may not be able to sustain their business unless major structural changes are carried out. Interest and fuel costs need to stabilize. This will allow carriers to adjust fares and thereby keep demand stable for a long period.

In a falling economy, the aviation industry would normally be one of the early birds to hit the air pocket. The reason is intense competition from other transportation modes and the growing ICT infrastructure that can somewhat obviate travel.

Click for complete article

Airline sector has moved into negative growth and urgent reforms are needed if it wants to survive a “perfect storm” hitting the industry, an association said Wednesday.

Growth has slowed from 33 per cent in 2007 to 7.5 per cent for the first six months of this year, Giovanni Bisignani, director general and CEO of the International Air Transport Association (IATA), told business leaders here.

“The global crisis resulting from high oil prices and declining traffic is hitting India hard,” Bisignani said, adding the last two months “have been negative.”

“Indian carriers could post 1.5 bn dollars in losses in 2008, the largest outside the US. Urgent action is needed to help Indian carriers weather the perfect storm of high costs and falling demand,” he said.

Click for complete article

Claustrophobia is usually described as a fear of enclosed places. A more accurate description might be “a fear of not having an easy escape route”. 2008 has seen 111 air safety incidents worldwide, almost half of which resulted in fatal or ‘hull-loss’ accidents. While the total number of hull losses was more than the 10-year average, the death toll in these accidents was less.

This spurt in the accident rate has spurred the safety conscious world into action. The National Transportation Safety Board and FAA have initiated action to address fatigue as a factor in accidents. There is a concerted move to reduce the duty time and increase the rest period of pilots.

Some of the accidents resulting in loss of lives or complete destruction of the aircraft should raise concern in India. The British Airways 777 accident in London Heathrow, has been attributed to fuel contamination because of ice formation. The aircraft had flown under extremely cold conditions. Safety recommendations have been initiated to overcome this problem. While approaching Heathrow airport, the aircraft experienced a sudden partial power loss on both engines, and the aircraft crashed short of the runway. Emergency services were able to reach the aircraft within seconds.

On August 20, 2008, a Spanair Flight JK5022 carrying 172 people on the MD-80 aircraft, crashed immediately after take off and 154 people died in that accident. The investigation report is yet to be published. There is a suspicion of overloading and a power loss on take-off. The crash took place within the airport perimeter and fire service equipment was able to reach the site immediately.

On September 14, 2008, Aeroflot-Nord flight 821, a Boeing-737-500, belonging to a branch of the national airline Aeroflot, was on a flight from Moscow to Perm, near the Ural mountains. It crashed short of the runway, killing all 88 on board. The accident site was near the trans-Siberian railway track and it shut down rail traffic for a considerable period of time.

Click for complete article

The Indian subsidiary of Boeing Co, Boeing International Corporation India Private Ltd (BICIPL), is looking to bid for the $20-billion worth defence aircraft orders expected in India over the next 10-15 years.

“As a company half of our revenues come from the defence sector, so we are actively working with the Ministry of Defence to compete for a number of opportunities in India,” Dr Ian Thomas, President, Boeing India, said on the sidelines of a conference here on Thursday.
Patrol aircraft

The company plans to bid for the maritime patrol aircraft, fighters in the form of the F-18 Super Hornets, heavy lift helicopters, attack helicopters and host of other opportunities that the sector offers.

In addition, it is also eyeing orders for 1,001 commercial airplanes worth over $105 billion that India would require over the next 20 years.

Dr Thomas said, Boeing in India is also very much engaged in the productivity side by building a number of long-term strategic partnerships in key areas such as information technology, business process and knowledge sourcing, engineering, R&D activities and components.

It is also in talks with Tata Industries for its proposed joint venture company that will make aerospace components.

Boeing and Tata had signed a pact to form a joint-venture company that will initially invest $500 million for defence-related aerospace component manufacturing in India.

Click for complete article

With the European aerospace industry looking at cutting costs, India can become an important outsourcing destination, an official of aircraft major Airbus Industries said here on Friday.

“Airbus is into cutting costs by outsourcing components. In future, we will outsource engineering as well as production jobs,” Martin Kraus, who heads Airbus A400 Military Systems, said here.

According to him, the challenges faced by Airbus in the civilian segment are increased competition from aircraft manufacturers in Brazil and China, low value of the American dollar and volatility in oil prices.

In the military segment, the defence budgets of European countries are coming down; Kraus said during his address at Connect 2008, an information, communication and technology meet organised by the Confederation of Indian Industry (CII).

Click for complete article

Satyam Computer Services Ltd has roped in senior officials, including retired, from Boeing, Airbus, Cadence and Bombardier to strengthen its aviation practice.

Mr John Douglass, former president and Chief Executive Officer of Aerospace Industries Association of America, which represents US aerospace manufacturers, will join Satyam as an advisor. He is also an advisor to the Senator, Mr Barack Obama, the Democrats’ Presidential candidate.

“Mr Douglass has accepted our offer,” said Mr Subu D. Subramanian, Director and Senior Vice-President, Satyam.

Click for complete article

The government, on Thursday, finalized the guidelines for setting up greenfield airports. All the proposals for the new airports will be routed through the steering committee. The civilian aviation ministry will serve as the secretariat of the starting committee of the Greenfield policy.

Click for complete article

Aiming to compete with their rivals in the international market, the fast-growing Indian airlines are looking at global platforms to widen their overseas presence.

The two Indian international carriers, Air India and Jet Airways, currently have less than 25% share in the long-haul market to and from the country. With the third carrier Kingfisher Airlines joining the ranks this month, the Indian aviation scenario is all set to change.

Kingfisher Airlines, which is starting its international operations on September 3 with a Bangalore-London flight, is considering options to join the SkyTeam Alliance led by Air France-KLM and Delta Airlines of the US. The national carrier, Air India, has already joined the Star Alliance, the world’s largest airlines consortium led by Lufthansa and Singapore Airlines.

Click for complete article

Indian aviation may be in the dumps currently with airlines cutting down on operations and passengers gravitating towards trains, but aircraft manufacturer Airbus continues to remain upbeat about its future in India. Not only is the European major expecting the next wave of orders from India’s airlines in three to four years’ time, it is also considering the country as one of the key centres for design and development of its long-haul A350 plane, set to take on rival Boeing’s much publicized 787 Dreamliner.

”As Air India, Jet Airways and Kingfisher Airlines look to compete in the international arena there is likely to be need for more aircraft. We expect that the next big wave of orders will come in 2011-12 by when these airlines will have completed the delivery of the aircraft already ordered. The airlines will need aircraft to continue on the growth path that they have embarked on. Besides, there will also be need for freighter aircraft,” Dr Kiran Rao, Executive Vice- President, Sales and Marketing, Airbus, said.

Click for complete article

The government on Thursday approved modernisation of the Chennai and Kolkata airports. Expansion of the two airports is estimated to cost over Rs 3,750 crore and these projects are to be completed within three years. The entire modernisation work would be taken up by the Airports Authority of India (AAI) beginning September this year. AAI will invest 80% of the required capital through internal resources, and the remaining 20% would be borrowed.

While the Kolkata airport would be developed at an estimated cost of Rs 1,942.51 crore, modernisation of the Chennai airport would cost Rs 1,808 crore. The Kolkata project would be completed within 30 months of awarding the contract, while the Chennai project would have a lower implementation period of 26 months.

Click for complete article

Deccan Express Logistics, an air and ground distribution network company formed by Capt. G.R. Gopinath, plans to raise $200 million to fund the project, which is expected to become operational by the first quarter of the next financial year.

The company has appointed Edelweiss, an investment banking and financial services company, to arrange for funding from private equity and help it with a business model to run its fully integrated logistics service.

Capt Gopinath told Business Line that he hopes to raise $70 million in the next four months, while the remaining funds were expected to be arranged within three years with the help of Edelweiss.

Click for complete article

Lease rentals for aircraft in global markets have fallen by 15-20 per cent over the past four months, which dealt a further blow to bleeding Indian carriers looking at sub-leasing their aircraft to other airlines in order to shed excess capacity.

With losses of over $ 2 billion expected by the aviation industry this year, airlines have been looking at various ways to cut capacity and reduce the number of flights. One way has been to sub-lease their existing aircraft to another carrier which wants quick delivery at a premium, especially if it comes with a crew and pilot also. This market is now drying up.

“Demand and supply equations have changed in the aviation market space because of the fact that 25 airlines have closed down and airlines worldwide are reducing and redrawing capacity. This has resulted in softening of the lease rental market by 15-20 per cent and is likely to slide further in the second quarter of the current fiscal,” said Kapil Kaul, CEO (Indian sub-continent and Middle East) Centre for Asia Pacific Aviation.

Click for complete article

Speedier acquisition of armaments, systems and platforms while ensuring greater transparency in the procurement process are some of the hallmarks of the Defence Procurement Procedure – 2008, which was unveiled by the Defence Minister Shri AK Antony, here today.

The 248 page document will be operational from September 01, 2008. The DPP – 2008 aims at giving a boost to indigenous Defence industry, encourage competition by broadening the vendor base, puts more thrust on quality and reliability and enhancement in the delegation of financial powers to the Services.

Unveiling the document at a crowded Press Conference, Shri Antony said ‘the present document is the outcome of the experience and feedback gained in the implementation of the existing procedure’.

Outlining the background to DPP – 2008, Shri Antony said, ‘Armed Forces all over the world are in a process of speedy modernization and restructuring. India cannot lag behind in this trend. We want a highly modern Armed Force, which will be able to respond quickly and which will be able to meet any challenges.’

Shri Antony said we have a vibrant democracy and therefore, we have to follow a set of procedures for acquisition of systems and platforms, which must be transparent. Sometimes, the system of acquisition has created delays or it has created controversies. ‘We have learnt a lot of lessons from the past and we don’t want to repeat the mistakes. That is why every now and then, we are trying to improve the Defence Procurement Policies.’

Click for complete article

Rationalization of licensing condition, introduction of offset banking listing of defence products and exemption from offset of acquisitions under fast track procedures are some of the salient features of the New Defence Offset Policy as envisaged in the Defence Procurement Procedure (DPP) - 2008 released here today.

Under the existing offset guidelines, a private industry was necessarily required to have an industrial license for being entitled to participate in the offset programmes. In the revised guidelines a private industry will be required to have an industrial license only if so stipulated under the guidelines/licensing requirements for the defence industry issued by the Department of Industrial Policy and Promotion.

Click for complete article