Air India’s Rs 750 crore bills outstanding

First HAL-built civilian Do 228

Minister of State for Civil Aviation, Jayant Sinha, inaugurated structural assembly of the first HAL-built Dornier 228 intended for the civilian market at HAL’s Kanpur facility on 11 December 2016. HAL CMD T Suvarna Raju expects the first aircraft to roll out by April 2017. The Do 228-201 is a 19-seat commuter aircraft currently manufactured at HAL’s Transport Aircraft Division (TAD) in Kanpur, and is promoted by HAL to be a “most suitable product under ‘Make in India’ to support the Regional Connectivity Scheme (RCS) of the Ministry of Civil Aviation.” As a proactive step in this direction, HAL’s board had sanctioned Rs 100 crore for two civil variants of the Do 228, even though there are no airline orders for these aircraft yet. “We see a big business opportunity in this segment for next 10 years,” said Suvarna Raju.

Air India has generally been at the receiving end of criticism for its poor performance and huge losses but it was recently revealed that the Government of India owes the airline a massive Rs 750 crore. The flag carrier is utilised for flying VVIPs such as the President, Prime Minister and politicians with ‘Z’ category security cover. Still, Air India made a small operating profit of Rs 105 crore in the previous financial year (2015-2016) but remains loss-making overall owing to a large debt burden, among other factors. The airline had received a bailout package of Rs 30,000 crore from the previous UPA government, but needs additional funds to sustain its turnaround plan.

Navi Mumbai airport delay

The Navi Mumbai international airport is unlikely to meet its 2019 inaugural deadline with three of the qualified bidders raising questions about the timeline and cost overruns involved in executing the Rs 16,000-crore project. The four bidders who had qualified for the project are Tata Realty & Infrastructure, Hiranandani Group, GMR Infrastructure and GVK Power & Infrastructure. The first three have expressed serious concerns on completing the project by 2019. GVK Infrastructure is the only firm that has not expressed reservations to meet the 42-month deadline which the state government plans to set.

A Tata Realty official said the deadline set by City and Industrial Development Corporation (Cidco), a planning agency of the state government, was “ridiculous.” While Cidco anticipates completion within three-and-a-half years, but “ground-levelling work itself will likely take over two years.” However, Cidco still claims that one runway will be operational by 2019 and the entire airport ready by 2020.

Strategic disinvestment in Pawan Hans

Moving ahead with the strategic sale of Pawan Hans (erstwhile Helicopter Corporation of India), on 13 January 2017 the Government announced its intention to sell off its entire 51 per cent stake and to transfer management control. Pawan Hans is a joint venture where state-owned ONGC presently holds 49 per cent. As per the public notice, issued by the Department of Investment and Public Asset Management, a transaction advisor is to be identified from “reputed professional consulting firm, investment bankers, merchant bankers, financial institutions and banks” who would provide advisory services and manage the strategic disinvestment process. The deadline for sending the applications is 2 February 2017.

Indian MRO market to grow by 2036

In December 2016, KPMG in India unveiled a background paper on the MRO sector that underlined the growth of the civil aviation, and projected that Indian carriers will grow to operate some 1,740 aircraft in total over the next 20 years, while the MRO market would swell commensurately to $5.2 billion by 2036. The paper was formally released by Ashwani Lohani, Chairman and Managing Director, Air India, in the presence of Stephane Lauret, CEO, Safran India, Dr BP Sharma, CMD, Pawan Hans, HR Jagannath, CEO, Air India Engineering Services, Ravi Menon, Executive Director, Air Works India, and Pulak Sen, Founder Secretary General of the MRO Association of India. The paper highlighted the opportunities in the Indian MRO industry, the impact of the new National Civil Aviation Policy (NCAP 2016), the proposed Goods and Services Tax (GST), the Regional Connectivity Scheme (RCS), and addressing challenges related to service quality, leasing, financing, certification and skill development.