Civil Aviation Ministry may take time to decide on pending proposals

MUMBAI/DELHI: The Civil Aviation Ministry is going slow on several pending proposals, including a revision of airport charges and enhancement of bilateral flying rights, as civil servants are reluctant to take decisions close to the upcoming general elections in April-May.

Even granting a permit to Air Asia — which has entered into a joint venture with Tata Sons — may take more time than anticipated, say officials involved in the decision-making process.

"There are several proposals pending. At this time, you need to fasttrack decisions to clear some of them. None of that is happening," said a government official who didn't want to be named. The officials said there was a widespread feeling that contentious decisions should be left to the next government.

Further, the government is reluctant to take unpopular decisions such as raising airport charges, which could hit the Congress-led UPA government's prospects in the elections.

MUMBAI AIRPORT CHARGES

One of the proposals facing delays is an application from GVK-controlled Mumbai International Airport seeking to increase airport charges. The proposal was submitted in December, 2013 and GVK wants the tariffs to be revised from April 1 this year.

"Typically, the process (of fixing tariffs) takes many months. They had sent the first proposal in October 2013 and the revised proposal was finalised by mid-November after which stakeholder consultations were held. Stakeholder consultations itself is a lengthy process. So there's no chance that the tariff at Mumbai airport will be revised before the (general) elections," said a senior official at the Airports Economic Regulatory Authority.

Mumbai airport opened its new terminal on January 10. The terminal, which cost Rs 5,500 crore, will open to passengers on February 12. GVK has cited higher depreciation costs on the new terminal to back its case for higher tariffs.

AERA's decision last year to let Mumbai and Delhi airports increase charges by 154 per cent and 346 per cent, respectively, earned it considerable flak from global airlines as well as the International Air Transport Association (IATA). They claimed it would depress demand for air travel.

"The government's proposal would land it in a sticky situation at the elections as it would increase the burden for the air traveller," said Kapil Kaul, CEO, South Asia at Sydneybased CAPA-Centre for Aviation.

APPROVAL TO AIR ASIA 

Two Indian joint ventures from two global airlines—AirAsia and Singapore Airlines—which are at various stages of clearances, may also experience some regulatory turbulence. Both have tied up with Tata Sons. While Tata-SIA is awaiting a no-objection certificate from the aviation ministry, AirAsia is waiting for an air operator's permit from the Directorate General of Civil Aviation, the last stage before it starts flying in India.

Industry insiders said the ministry is "unnecessarily delaying" the clearance process. The DGCA recently put up a notice on its website seeking public views and objections on the AirAsia proposal. On February 19 last year, AirAsia announced it will set up an airline in India. It got a nod from the foreign investment promotion board, which clears overseas investment proposals, on April 5 and an NOC from the ministry on September 26. 

"The airline isn't new. It has units in several countries. It fulfils all the prerequisites required for an airline to fly in India. The public notice should have come at the beginning of the government's scrutiny process, not now," said the insider. 

Another potential impediment for AirAsia is a court case filed on July 25 by BJP leader Subramanian Swamy saying FDI is only permitted in existing airlines and no new company can be floated. The government eased rules in September 2012 to allow foreign carriers to purchase up to 49 per cent in India's airlines. 

BILATERAL RIGHTS 

Officials also say that India will go slow in enhancing bilateral rights between India and United Arab Emirates, Qatar and China. Close to the easing of FDI rules, the government trebled the weekly seat allocations between India and Abu Dhabi. That appears to be one of the key factors behind a deal where Jet sold 24 per cent stake to Etihad Airways for $379 million. 

The enhancement led to Swamy filing a PIL in the Supreme Court accusing the government of diverting Indian international traffic to foreign carriers. Meanwhile, Emirates, which uses all of the 54,000 weekly allocated seats between India and Dubai has proposed enhancing the rights by another 10,000 seats. Qatar has sought to enhance its weekly quota of seats to 72,600 from the current 24,800.

The enhancements sought are linked to a separate proposal — that of allowing the Airbus A380 plane into Indian airports. Unless more seats are allowed, it would be pointless for foreign carriers such as Emirates to bring in jumbo planes to India. This proposal awaits a final clearance from civil aviation minister Ajit Singh.

The model code of conduct for the elections kicks in by end of February. However, ministry officials say that there are no legal or regulatory hurdles to clearing these proposals. "Most of the proposals, including AirAsia and revised airport tariffs can be cleared even while the code of conduct is on," said a joint secretary at the aviation ministry.

Officials say the ministry is keenest at this point in time to change a rule that requires airlines to fly domestic for five years and own a fleet of 20 planes before it can fly international. The ministry is currently drafting a Cabinet note on this. The minister has said he is confident of having the rule changed by end of February. But even in this, not everyone is confident. 

"The only airline which currently doesn't have international flying rights is Go Air, but it will anyway get them in July when it has a fleet of 20 planes since it has already completed more than five years. Among the new ones only Tata-SIA would be keen to fly international so the rule may be construed as favouring the airline," said an industry expert.

DGCA seeks views on AirAsia permit

The Directorate General of Civil Aviation on Monday updated its public notice inviting comments, suggestions and objections if any against the grant of an Air Operator's Permit to AirAsia India. The updated notice clearly specifies that work on processing the application is happening alongside collection of public views. 

It also tells the public to send in comments/suggestions/ objections giving specific grounds of objections with a certificate of authenticity. The timeline for sending the comments remains the same, thirty days from the date of the first issue of the public notice on January 13. Air Asia got an NOC from the ministry on September 26. 

Tata-Singapore Airlines joint venture orders Airbus A320s: report

Singapore Airlines has picked Airbus's A320 aircraft over Boeing's 737 for the launch of its Indian airline joint venture with Tata Sons, sources familiar with the decision said.

The full-service carrier will take up to 20 A320s worth $1.83 billion at list prices. The planes will be sourced from leasing companies, rather than purchased direct from Airbus.

A project team set up by Singapore Airlines evaluated both aircraft and decided to place orders for the A320, two sources said. The decision extends the European planemaker's domination of India's single-aisle aircraft segment.

A Singapore Airlines spokesman referred queries to the joint venture's office in India, while an Airbus spokesman in Singapore said: "We do not comment on commercial discussions with existing or potential customers."

The new airline, which has not yet been formally named, is expected to begin operations in the second half of this year. It has begun recruiting pilots and is close to confirming its top executives, including a Singapore Airlines executive as its chief executive officer.

The airline applied for a "no-objection certificate" from India's civil aviation ministry and an air operators' certificate from the Indian Directorate General of Civil Aviation in late December.

It will initially operate domestic services from New Delhi and compete with full service carriers Air India and Jet Airways, which are the only players in the full-service market since the collapse of Kingfisher Airlines in 2012.

Around 70 percent of the Indian domestic market is dominated by low-cost carriers such as IndiGo, SpiceJet and GoAir. Tata is also starting up a low-cost carrier joint venture with Malaysia's AirAsia, increasing the competition in this segment.

IndiGo, which has the largest share of the Indian domestic market, has more than 70 A320s in its fleet and orders for around 190 of the existing aircraft and the upgraded A320neo variants, to be delivered over the rest of this decade.

GoAir, which will have 20 A320s in its fleet this year, has orders for another 72 A320neo aircraft.

Indian flag carrier Air India's narrowbody fleet comprises mostly the A320-family of aircraft, while its low-cost subsidiary Air India Express operates around 20 737s.

The Jet Airways narrowbody fleet comprises only 737s, while SpiceJet operates just over 40 737s and has placed an order for 40 more of the re-engined 737 Max variant.