IPO Would Happen at the “Right Time”: GoAir

GoAir, owned by the Bombay-based Wadia Group, is the fifth largest airline in the country with a low passenger market share. It started its operations in 2005 and has had a slow growth owing to the tough aviation environment in India. The company says that the slow growth is strategic so as to maintain profitability.

GoAir buys A320 neosIn June 2011, budget carrier GoAir had placed an order with Airbus for 72 new A320 neo aircraft valued at about Rs 3,24,000 million. Besides, it also signed a Memorandum of Understanding (MoU) with Airbus for another 72 A320neo aircraft at Farnborough International Airshow in June 2016. About the MoU with Airbus, CEO Wolfgang Prock-Schauer said the order is expected to be in place in the next 2-3 months.    “Economic things are stipulated in the MoU and only legal issues are to be worked out,” he added.

GoAir is now eligible to start international flights and is believed to have plans to come out with its initial public offering soon. It plans to raise funds through IPO to start its international operations.

GoAir had filed an application earlier this year for its International traffic rights.

GoAir has now obtained government’s approval to fly to nine countries including Iran, Uzbekistan and Kazakhastan. It expects to start international operations from the next summer schedule — which generally spans from the last Sunday of March and extends to the last Saturday of October. GoAir would be the first Indian private carrier to fly to any CIS (Commonwealth of Independent States). The Ministry of Civil Aviation has awarded GoAir the ensuing routes and frequencies:neo

– Mumbai Int’l or Delhi Int’l to Tehran Imam Khomeini (Iran) – 7x weekly;
– Mumbai or Delhi to Guangzhou or Kunming Changshui (China) – 7x weekly;
– Mumbai or Delhi to Ho Chi Minh City (Vietnam) – 7x weekly;
– Mumbai or Delhi to Malé (Maldives) – 7x weekly;
– Mumbai or Delhi to Baku (Azerbaijan) – 3x weekly;
– Delhi to Tashkent Yuzhny (Uzbekistan)/Almaty (Kazakhstan) – 4x weekly;
– Kochi Int’l or Bangalore Int’l to Doha Hamad Int’l (Qatar) – 7x weekly;
– Kochi/Thiruvananthapuram/Hyderabad Int’l/Kannur to Dammam (Saudi Arabia) – 7x weekly.

Apart from this, GoAir has said it will start seven new flights from 21 August which would connect Delhi to Jaipur, Lucknow, Mumbai, Pune and Guwahati.

Four direct flights connect Delhi, Jaipur and Lucknow. In addition, there will be three connecting flights start from Guwahati, Mumbai and Lucknow and lands at Jaipur, Lucknow and Pune respectively via Delhi.

Almost all these flights are in the afternoon time.

download (6)On the much-awaited IPO, Prock-Schauer has said that plans are on for listing and it would happen at the “right time”.  “We are preparing ourselves (for the IPO). Its a question of timing, it is about the right timing. We are not in a hurry. We will wait for the right timing. We want to be well prepared. There are many things which we need to look at (before going to stock exchange),” he said.

GoAir is aiming for 26 aircraft by end of March 2017 from the current fleet strength of 21. As GoAir prepares to expand its aircraft fleet and fly overseas, its manpower requirement is also building up. Gearing up to implement its ambitious expansion plans, GoAir plans to hire 500 personnel, including pilots, in near future.

“We will expand our fleet by up to 26 aircraft by the end of March next year. We need to build up for the expansion that we are going for. Every aircraft (inducted) needs 100 increase (in manpower) approximately. So we will naturally hire,” he told media. This would result in hiring requirement of at least 500 personnel, including a significant number of pilots. At present, GoAir’s head count is around 2,300, Prock-Schauer said.

 

0.33 Million High-end Jobs in Indian Civil Aviation by 2025

Civil Aviation Minister Ashok Gajapathi Raju
Civil Aviation Minister Ashok Gajapathi Raju

The new National Civil Aviation Policy (NCAP) aims to transform the aviation in India. As per the Civil Aviation Minister Ashok Gajapathi Raju, the NCAP will create about 0.33 million high end jobs in India in the field of civil aviation . It is the estimated direct additional employment requirement of the Civil Aviation sector by 2025. This will give a boost to the employment sector. 

“Apart from this a large number of jobs will get created in allied sector and in tourism sector too as the growth of the aviation is directly related to tourism. Tourism will get a huge boost through the upcoming new airports and new airlines,” he has said.  “All training in non-licensed category will conform to National Skill Qualification Framework standards. Ministry of Civil Aviation will provide full support to the Aviation Sector Skill Council and other similar organisations and agencies for imparting skills for the growing aviation industry. There are nearly 8,000 pilots holding CPL but who have not found any regular employment. MoCA will develop a scheme with budgetary support for type-rating of pilots. The detailed scheme will be worked out separately.” 

FDI norms liberalized.

Nine sectors have been thrown open to increased Foreign Direct Investment (FDI) and/or portfolio investment. There is an air of easy globalisation. It is generally in sectors where the entry of foreigners may not worry any domestic player of competition.

Economic Affairs Secretary Shaktikanta Das
Economic Affairs Secretary Shaktikanta Das

A certain positive in the FDI policy is that it is friendly to jobs.

As per Economic Affairs Secretary Shaktikanta Das, manufacturing and job generation will get a boost by the latest round of liberalisation in FDI norms that include doing away with dual clearances.

“With this FDI liberalisation, we expect manufacturing activity to come in…more activity in defence products. The driving force behind the whole thing is that all this investment should facilitate creation of jobs,” he told media.

He has welcomed the government’s move to approve 100% FDI in aviation, defence and e-commerce sectors, saying this initiative will boost employment.

“For civil aviation, this will be a very big game changer. A 100 percent FDI can come in. So, it will definitely assist the domestic aviation companies to strengthen themselves, to expand their network and also in the process create jobs for our youngsters in various capacities for repairs or as pilots or flight crew,” he told the media.

On FDI, the civil aviation secretary R.N. Choubey has said, “The government has flipped the coin.”

“Which country in the world is going to give them 22% growth rate? After all, the entire Gulf aviation sector… is built on the back of India’s strength. If that’s the case, why will they not come into India itself? If someone else is willing to put money in their country based on India’s business, then I can say it is even better, let them come, I open the doors of FDI, let them come and do business in India,” Choubey has stated.

The government is expecting big FDI inflows from West Asia in aviation. Air traffic to and from West Asia to India is critical for foreign airlines based in the Gulf.

The demand for flight services to key Gulf destinations from Tiruchi in India is so much that the Tiruchi Airport authorities have appealed to two Indian airlines to begin services in that sector and to operate flights in the domestic Tiruchi-Mumbai-Tiruchi sector as well.

The airport authorities conveyed their interest in this regard through separate letters forwarded to IndiGo and SpiceJet.

The request has been made at a time when there is a huge demand for operation of international flights to connect more West Asian countries from Tiruchi as well as to augment domestic connectivity. At present, Air India Express is the lone overseas carrier operating a daily service to Dubai.

If the expectations come true, it will mean a big infusion of money into the capital-starved domestic aviation sector, stimulating job opportunities and kick-starting the investment cycle in the economy.

Choubey said he has had interactions with several top international airlines operating in and out of India like Emirates, Qatar Airways who have evinced interest in investing in India’s aviation sector.

Industry welcomes FDI move.

Chandrajit Banerjee CII Director General
Chandrajit Banerjee, CII Director General

The government’s move to ease FDI norms in civil aviation, by permitting more investments under the automatic route will further help attract big investments and boost job creation. Chandrajit Banerjee CII Director General said, “Liberalisation of the FDI regulations reflects the government’s commitment to reforms and openness, and reassures investors that ease of doing business remains a high priority.” 

Terming the simplification of policy framework governing investments in strategic sectors like defence and aviation as a “huge positive for the economy”, Ficci Secretary General A Didar Singh said: “The Modi administration through these moves has once again highlighted that reform is a continuous process in order to capitalise on the potential India offers.”

Singh felt that “There is no doubt that India today is the most preferred investment destination in the world. While the attraction of our market is known to all, there is now even more reason for global investors to commit themselves for making and doing business in India”.

ASI and AAI sign MoU.

Aviation Strategies International (ASI), a Corporate Partner of the Royal Aeronautical Society,  recently signed a Memorandum of Understanding (MoU) with the Airports Authority of India(AAI), a government agency of the Ministry of Civil Aviation of India entrusted with the development, expansion and modernization of its air traffic services, passenger terminals, operational areas and cargo facilities.

Founded in 1998, ASI is recognized for providing strategic advice and competency development consulting services at the corporate level, in the field of civil aviation. Its multidisciplinary team of international aviation specialists offers objective, tailored recommendations that are aligned with industry best practice. ASI’s main offices are located in Montréal, with regional representations in Atlanta, Beijing, Melbourne and Ottawa.

AAI and ASI agree to work together through a broad cooperation framework to jointly implement world-class competency building initiatives that encompass training, research and technical cooperation. They will systematically address the professional development needs of AAI employees at all levels and will extend their NATS_building,_new_delhicooperation to the various training establishments of AAI, including the Indian Aviation Academy (NIAMAR), for the delivery of national, regional and international programs. They also plan to share their joint expertise and innovations in the development of human resources with industry stakeholders.

“The Indian aviation sector is growing at a phenomenal pace; one of the fastest in the world. AAI is poised to provide active leadership and make innovative professional contributions for the betterment of the aviation industry, both in India and globally. The new India National Civil Aviation policy provides an impetus for major investments in infrastructure and human capital over the coming years and we are indeed honoured to have been asked to actively support AAI’s goals by marshalling our expertise in the various targeted areas of excellence”, remarked Dr. Pierre Coutu, ASI’s President.

Dr. Pierre Coutu, ASI’s President.
Dr. Pierre Coutu, ASI’s President.

The new National Civil Aviation Policy aims to transform the aviation map of India by reviving numerous airports and airstrips that are either not operational or see little activity. As per the policy document, India has 450 airports and airstrips but only 75 have scheduled operations. A number of these belong to defence establishments while some others belong to State governments or private entities. Many of these airports or airstrips are not operational.  

Boosting regional air connectivity is a highlight of the policy – a job that may prove challenging given the present domestic passenger traffic trends at our airports. 

In June 2016, AAI released the air traffic data for April 2016 relating to 82 airports (international and domestic airports, apart from ones owned by state governments and private parties). It  reveals that :

  • Large Metro airports account for the bulk of the domestic traffic
  • Nearly 65% of the domestic passenger traffic totaling nearly 16 million was handled by just 6 airports – Delhi, Mumbai, Bangalore, Chennai, Kolkata and Hyderabad.
  • 26 airports recorded traffic exceeding 0.1 million domestic passengers. Between them, these airports accounted for over 90% of the total domestic traffic handled.

The Regional Connectivity Scheme, to be implemented from the second quarter of 2016-17, aims to revive the fortunes of un-served or under-served airports and routes. The government has offered several incentives to promote these under served locations.

The FDI policy is expected to boost the civil aviation sector further. It now permits  100% FDI under automatic route in brown field airport projects.

The policy outlines a “demand driven” approach to reviving these, “depending on firm demand from airline operators, as no-frills airports will be done at an indicative cost of Rs 500 million to Rs 1000 million, without insisting on its financial viability. Inputs from and willingness of the State Governments will be taken before revival of any airport is undertaken. AAI/State Govts can explore possibilities of developing these airports through PPP also.”

The Union Budget 2016-17 had also proposed to develop 160 non-functional airports at a cost of Rs 500 to 1000 million each.

It remains to be seen whether these policy measures will inject life into the various dormant airports and airstrips on India’s aviation map.