From Jet Airways closure to Air India crisis: How India's aviation sector stalled in 2019

The sector started the year with the grounding of Boeing 737 Max aircraft in the country after the deaths of over 300 people in the Lion Air and Ethiopian Airways crashes.

Published: 25th December 2019 02:48 PM  |   Last Updated: 30th December 2019 03:25 PM   |  A+A-

Kempegowda international airport, Bengaluru airport

Representational Image. (Photo | EPS)

Online Desk

2019 was not a kind year for Indian aviation.

Amid an overall economic downswing, the sector started the year with the grounding of Boeing 737 Max aircraft in the country after the deaths of over 300 people in the Lion Air and Ethiopian Airways crashes. Then it witnessed the closure of India's only privately-owned full-service carrier Jet Airways. Towards the end of the year, Air India sought to go down the privatisation route to save itself from towering debts.

There were also notable incidents of runway excursions in some of India's prominent airports, which put a question mark on the sector's overall safety standards.

According to a December report by aviation consultancy firm CAPA, Indian carriers are estimated to report a consolidated net loss of over USD 600 million in 2019-20. This report completely contradicted the agency's previous report in June 2019 when it had projected a consolidated net profit of USD 500-700 million for the ongoing fiscal. CAPA also called their latest projection the most significant downgrade within one quarter in more than 16 years. 

The report came on the back of SpiceJet and IndiGo reporting losses of Rs 462.6 crore and Rs 1,062 crore respectively for the September quarter on account of new accounting norms, grounding of certain aircraft and rise in total expenses. The consultancy firm also revised its outlook for Air India and said it might report a loss of over USD 500 million against the earlier estimate of USD 150 million.

Let's revisit how the industry fared in 2019.

Crisis-hit Jet Airways gets grounded

On April 17, 2019, Jet Airways, India's only private full-service carrier, flew its last commercial flight after facing increasing competition from domestic low-budget carriers such as IndiGo and SpiceJet, along with mounting financial debt in the last few months.

Its downward spiral started in 2017 when it came second to IndiGo in terms of passenger market share. Then in 2018, it reported a negative financial outlook due to increasing losses. During March, nearly a fourth of its aircraft were grounded due to unpaid lease rates. In April, the Indian Oil Corporation (IOC) stopped providing fuel to the crisis-hit airline, citing non-payment of dues.

Despite the resignations of Jet's founder Naresh Goyal and his wife Anitha from the airline's board of directors, there was no relief in sight as the airline failed to attract fresh funding, resulting in the loss of membership in the International Air Transport Association (IATA). At the time of its closure, Jet was going through insolvency proceedings with a whopping debt of $1.2 billion.

After the suspension of Jet's operations, while Goyal faced Enforcement Directorate (ED) heat, prominent companies like Vedanta Group and Etihad decided against filing Expression of Interest (EoI) to invest in the crisis-hit airline. It is to be noted that in 2013, Etihad had acquired a 24 per cent stake in
Jet. As per media reports, till August 11, Panama-based Avantulo Group and two foreign firms had submitted EoIs for Jet Airways.

Then in August, the National Company Law Appellate Tribunal (NCLAT) asked lenders of Jet whether they would cooperate with the Dutch court administrator who is also pursuing insolvency proceedings against the debt-ridden carrier. In September, Jet's resolution professional and the Dutch insolvency administrator agreed to cooperate in the whole matter.

The Jet crisis helped competitor SpiceJet post a record profit of Rs 261.7 crore in the quarter ending June 2019 as against a net loss of Rs 38.1 crore in the corresponding period last year. It also reported total revenue of Rs 3,145.3 crore during the April-June period as against Rs 2,253.3 crore in the same period in FY19, registering a growth of 39.5 per cent.

SpiceJet and Vistara Airlines inducted some of Jet's Boeing 737s into their fleets. SpiceJet will also induct four Boeing 737 Max aircraft, ordered by Jet earlier. The budget airline was given the maximum of 100 slots of Jet at the Mumbai and Delhi airports, while Air India got just 12.

The crisis also gave an opportunity for other Indian carriers to increase their fleets, with IndiGo placing an order for 300 Airbus A320neo family planes worth at least USD 33 billion, handing the plane-maker one of its largest orders ever. SpiceJet, which inducted only three Boeing 737 NG aircraft and one Q400 till 30 September, also plans to enhance passenger capacity in the near future. Vistara said it would almost double its fleet size to 42 planes by this fiscal end as compared to 22 aircraft in March 2019.

Jet's employees said the Modi government should protect the airline's 'historical rights' over its slots and encourage the National Infrastructure Investment Fund to invest in the full-service carrier. However, Civil Aviation Minister Hardeep Singh Puri said that giving jobs to former Jet employees is not in
his department's domain. He also informed the Rajya Sabha that a portal has been opened for the former workers to help them look for new jobs. Jet had around 18,000 employees when it suspended its international and domestic flights.

According to latest reports, South America-based Synergy Group, which showed interest in buying Jet, is now asking for more time to place its bid.

Air India set to be privatised amid protest by employees

On December 12, Civil Aviation Minister Hardeep Singh Puri said that the Modi government would sell its entire 100 per cent stake in Air India under the proposed disinvestment process, as the Centre-owned carrier reported a debt burden of more than Rs 50,000 crore, after facing losses in the last couple of years. It reported an estimated net loss of Rs 8,556.35 crore during 2018-19.

The Centre's move came after the debt-laden company sought a Rs 2,400 crore guarantee from the government to raise fresh funds to mainly meet its operational requirements. The airline also said that the pending November salaries of employees would be cleared by the end of 2019.

Talking about the employees, Puri informed the Rajya Sabha on November 27 that their interests would be protected and there would be no job losses. He also said that privatisation of the loss-making airline was the only option for his government while rejecting reports about Air India pilots quitting the company due to salary delays, reiterating that 25 per cent salaries of various employees were withheld when the company was in crisis.

Air India chief Ashwani Lohani too said in November that the airline was taking necessary steps to protect its employees amid divestment talks. Finance Minister Nirmala Sitharaman on 18th November said that the government-owned carrier's privatisation process will be completed by March 2020 and a lot of interest has been shown by potential investors. She also reiterated her government's commitment to sell the airline by the end of this financial year to complete its divestment target of Rs 1 lakh crore.

In 2018, when the Centre started the process to offload a 76 per cent stake in the carrier, it did not get a single bidder as investors feared potential government interference in the airline's operations.

Air India employees found Puri's statements to be 'highly damaging' and said it would have 'massive financial implications' for the national carrier.

The nearly 800-member strong Indian Commercial Pilots' Association (ICPA) also decided to bring all the unions at the Air India under a common platform to oppose the airline's privatisation, while threatening strikes if the pending salaries are not paid on time.

"Coming from the civil aviation minister, this statement is highly damaging, uncalled for at this stage and has massive financial implications for Air India, as our passengers will start cancelling their flight bookings and/or prospective passengers refrain from booking seats on AI flights from March 2020 or even before," the Aviation Industry Employees' Guild said in a letter to PM Modi.

The airline was also dumped by Qatar Airways which instead expressed a business interest in IndiGo.

In October, Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) came close to stopping aviation turbine fuel supplies to Air India at six major airports over payment delays. They deferred the move after the airline promised to make regular payments to clear over Rs 5,000 crore in overdue fuel bills.

However, there was a silver lining for the state-owned carrier during December as it received a guarantee worth Rs 500 crore from the government to secure fresh funds for operational requirements, along with reassuring words from American carrier Delta Air Lines which said it may invest in Air India if it gets an 'opportunity suitable to its strategic interests'.

The latest DGCA data also said that the debt-ridden airline ferried more passengers in December 2019 compared to 2018. It ferried 1.6 million passengers which is 14% higher compared to December 2018. But media reports also emerged saying the government-owned carrier had recorded its lowest market share in November -- 12.01 per cent.

PW engine and management tiff stall IndiGo's growth story

IndiGo, the low-cost budget carrier, which is the biggest airline in India as of 2019, in terms of passengers carried and fleet size had a mixed year. In October, it went for a $33 billion deal with Airbus for 300 A320neo, A321neo and A321XLR aircraft. The deal is expected to take the airline's total number of A320neo-type aircraft orders to 730, with the company's primary focus mostly on 'lowering operating costs and delivering fuel efficiency with high standards of reliability'. The A320neo fleet of IndiGo is the biggest in the world, with 97 aircraft under this narrow-body class operating alongside 128 A320ceos.

Apart from this, it became a member of the International Air Transport Association (IATA), following the lead of SpiceJet, Air India and Vistara. It also signed a one-way codeshare pact with Qatar Airways, enabling the latter to place its code on IndiGo flights between Doha and Delhi, Mumbai and Hyderabad, along with the opportunity of bypassing restrictions on adding more flights by funnelling IndiGo passengers. Plus in November, the airline made public its intentions to buy wide-body planes with business class seats for long-haul routes like London and Tokyo.

However, their investments in the A320neo family didn't produce the desired results. The latest upgraded version of the narrow-bodied aircraft remained in the media headlines for its technical glitches. The Pratt & Whitney (P&W) engines installed on the A320Neos faced a severe problem in the form of high vibrations and a stall-like situation in mid-air, along with false fire alarms going off inside the cockpit.

Another budget airline GoAir too faced similar issues in its newly-inducted A320Neos. The situation forced the DGCA to issue safety guidelines to both the carriers, telling IndiGo to ground an old A320neo with an unmodified PW engine for every new A320neo plane added to its fleet.

The aviation regulator also issued a January 31, 2020 deadline to IndiGo to replace all unmodified PW engines on its 97 A320neo aircraft or face grounding of those jets.

Adding to the existing woes, the budget airline also faced a boardroom war as InterGlobe Enterprises' Rahul Bhatia, one of the promoters of the no-frills carrier, filed petitions in a US court against Rakesh Gangwal and InterGlobe Aviation's (IndiGo's parent company) independent director Anupam Khanna. The face-off between Bhatia and Gangwal got media attention in July when the latter sought market regulator SEBI's intervention to address alleged corporate governance lapses at the company.

Talking about the petitions filed at two separate courts at Florida and Maryland during October, Bhatia said that proceedings were brought to obtain evidence from Gangwal and Khanna for 'use in foreign proceedings'. Earlier, both InterGlobe and Bhatia sought arbitration proceedings under the shareholders' agreement which was signed in 2015 between the former and Gangwal, the Chinkerpoo Family Trust, Shobha Gangwal, the RG Group and InterGlobe Aviation.

Both SEBI and Corporate Affairs Ministry started their investigation into the alleged governance lapses and violations at InterGlobe Aviation. In November, IndiGo CEO Ronojoy Dutta put on a bold face in front of media and said that the ongoing corporate feud has 'zero impact' on the airline's business prospects.

Monsoon 'slip-up' for Indian aviation

As soon as the Indian monsoon kicked in, dark clouds also loomed large on the Indian aviation sector and its safety standards. It all started with an Air India Express flight's failed landing in the Mangaluru Airport on June 30, when the Boeing 737 aircraft coming from Dubai veered off the taxiway after
landing at the tabletop runway and got stuck in the nearby grassy area.

A probe by DGCA later found that the aircraft's speed was too high and it touched down late in an 'unstabilized' approach, around 900 metres from the threshold area of runway 34. It resulted in runway excursion and damage to the passenger jet.

Following this incident, there were four more incidents of runway overshooting and veering off the designated operating line from June 30 to July 2.

In Surat, one Spice Jet flight from Bhopal overshot the runway amid heavy rain and strong winds. Then an Air India Express flight brushed against the runway surface while landing at the Kozhikode airport.

A SpiceJet Boeing 737-800 aircraft, coming from Jaipur, also overshot the Mumbai Airport runway.

Another SpiceJet flight from Pune had a rough landing at the Kolkata Airport and damaged four runway lights.

To make matters worse, on July 9, a SpiceJet engineer was killed after getting stuck in the flaps of a plane's landing gear door at the Kolkata Airport. A probe later found that the 22-year-old was untrained and working without any supervision.

Then in July, two pilots of Vistara airlines were grounded for issuing a 'Mayday' distress call due to low fuel near Lucknow airport while operating a Mumbai-Delhi flight. They later got permission from the DGCA to resume their duties.

IndiGo, too, contributed to the lowering of safety standards through incidents of mid-air engine vibrations in their A320neo aircraft, along with frequent smoke alarms.

Also, more than ten pilots and technicians across all major airlines were suspended by the DGCA for allegedly violating safety procedures.


Comments(1)

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  • eran

    what would be the next year for aviation?
    2 years ago reply
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