Parliamentary panel wants checks on airline mergers

NEW DELHI: Apprehending “monopolistic situations” in the wake of acquisition of Sahara Airlines by Jet Airways, a Parliamentary Committee has said there was a need to ‘check the trend’.

 

“Of late there have been changes in the strategy of private airline operators by way of consolidation of their operations…..these conditions can lead to monopolistic situation in the civil aviation sector and there is a need to check this trend,” the Committee on Tourism, Culture and Transport, chaired by Rajya Sabha MP Sitaram Yechury, said in

its report tabled in Parliament.

 

The committee said while formulating the new civil aviation policy, all consequences of mergers of airlines, including the matter of reallocation of infrastructural facilities at airports should be addressed properly.

 

It also came down heavily on Air India for “lack of transparency” in its procedure while negotiating a wet-lease accord of one A340-330E aircraft last year, which it said was “against the practice of open competitive tendering process”.

 

“The procedure followed by Air India was against the practice of open competitive tendering process and therefore lacks transparency,” it said.

 

The committee said Air India had approached only Jet Airways in July 2005 to negotiate the wet lease of one A340-330E aircraft.

 

“Air India could have approached other airline organisations,” it said, adding the carrier could have anticipated the impending shortage early had there been a constant assessment of available aircraft capacity.

The parliamentary panel said adequate contingency plans should be prepared, including standing arrangements for lease of aircraft during exigencies by following proper tendering process.

It also criticised the Civil Aviation Ministry for the under utilisation of traffic rights given to private airlines to fly to the US and Belgium.

“Despite the permission granted to private carriers to operate services to USA and Belguim, the services have not commenced and it is surprising that the ministry has left the matter to the commercial judgement of the concerned airlines,” it said.

The committee said there should be proper monitoring of the permissions granted by the ministry and “it must be ensured that the actual operations are started by the operators so that the stated objective of optimum utilisation of traffic rights is achieved.”

It also said the Civil Aviation Ministry must take necessary steps to ensure that time schedules fixed for the delivery of aircraft to Indian Airlines and Air India were adhered to so that “the national carriers are able to take maximum benefits of exemption from payment of tax under Section 10 (15A)”.

Original Article

Airline to wheelchair users: pay a carer

DISABILITY groups have reacted angrily to revised rules for wheelchair users on Virgin Blue, saying they had been told they would have to pay for carers to accompany them on flights.

Paul Nunnari, a Paralympics medalist who has propelled himself thousands of kilometres, said airline staff had told him he would have to be accompanied by a carer.

Women With Disabilities Australia says one of its members has also been advised by Virgin of a policy change which would mean that people who could not evacuate themselves in an emergency would not be allowed to fly alone.

The airline’s spokeswoman, Heather Jeffery, last night said the airline had produced a more detailed policy on special needs passengers, or “guests”, to take effect this Thursday.

But she denied it would mean more wheelchair users would have to pay for carers to accompany them.

Ms Jeffery denied the policy discriminated against wheelchair users, and said more and better equipment would be available for disabled passengers.

The airline was also taking account of the “wellbeing of our own staff who do their utmost to support guests whenever possible and in the past that has meant very manual support” as well as occasional requests for assistance getting to and from the toilet and with medications, requests which the airline could not always meet.

The airline’s policy states that its staff will not be able to help passengers needing assistance in getting to and from the toilet.

It also states that from Thursday Virgin Blue would require disabled passengers in some circumstances where they did not have a carer travelling with them to arrange for their own “assistance person” at departure and arrival points to help them on and off the aircraft.

The federal Human Rights Commissioner, Graeme Innes, said yesterday the new policy, as he understood it, was “a major backward step” and an issue which the commission would take up with aviation authorities.

He said the move had been taken “without any consultation to my knowledge with the disability organisations or my commission”.

Nunnari, the athlete tagged “the marathon machine”, who took silver at the Sydney Paralympics, said Virgin Blue had told him that from June 1 if he needed help to get to his aircraft seat, he would have to have a carer. Nunnari requires assistance to transfer to and from his wheelchair to smaller on-board wheelchairs to get to his seat.

“This is a completely antiquated and ludicrous notion,” Nunnari said, adding a Virgin clerk had also told him he would have to have a carer in the event of an emergency.

Nunnari’s protest has been backed by his local federal MP, Liberal marathon runner Pat Farmer, who said he had checked with the airline and got the same response from its staff.

Mr Farmer, member for the south-western Sydney seat of Macarthur, said if the airline did not change its policy he was prepared to push for legislative change.

“I am furious about this … This is cost-cutting gone mad,” Mr Farmer said.

Original Article

Airline backs inquiry into airport owner

AN inquiry into the UK’s airports market which could look closely at Edinburgh Airport operator BAA has been welcomed by no-frills airline easyJet.

The Office of Fair Trading is to consider an inquiry into the airports market with a view to establishing whether the current structure works well for consumers.

BAA owns and operates airports which handled 63 per cent of UK air passengers in 2005. Its last reported annual profits were £660 million.

OFT chief executive John Fingleton said: “We have decided to look more closely at how the airport markets work with the aim of establishing whether the current market structure delivers best value for air travellers.”

EasyJet, which runs flights from the Capital to a range of UK and European destinations, is concerned the company has an unfair advantage which is not benefiting customers.

Andrew Barker, easyJet planning director, said: “We are very pleased that the OFT is taking a close look at whether the UK airports market works well for consumers.

“We have been asking for this review for a long time and look forward to providing overwhelming evidence that BAA is not acting in anything like the interests of the travelling public.”

Original Article

Airline Loan-Guarantee Deal

When Congress offered the airline industry $10 billion in loan guarantees in 2001, lawmakers were criticized for wasting taxpayer money on sick and even dying airlines, delaying an inevitable industry restructuring.

As it turns out, taxpayers made money on the deal. Lots of money.

The Air Transport Stabilization Board is almost done with its work, and the airline-loan-guarantee program will end with a profit of more than $300 million, according to executive director Mark Dayton. “The taxpayer bore a real risk to earn that money,” he said. One reason for the large payday is that airlines only received a fraction of that $10 billion: In the end, the program guaranteed only $1.6 billion in loans.

Besides a $300 million bonus for the U.S. Treasury, consumers will continue to enjoy benefits from the ATSB. The board rescued America West Airlines and US Airways Group Inc. and helped facilitate a merger of the two. That created a big, national low-cost airline that helps keep ticket prices relatively low and increases pressure on competitors like Delta Air Lines to cut costs and restructure.

While rival airlines might have preferred to see a big airline or two go out of business so they could expand and raise fares, consumers benefit from having more carriers fighting each other.

“Without the ATSB loan, America West probably wouldn’t have survived and without America West, US Airways probably wouldn’t have survived,” says US Airways Chief Executive W. Douglas Parker. “Now merged, we employ 35,000 people and we just reported a profit in the first quarter.”

It didn’t always look like the loan program would work out so well. In late 2004, three of the six airlines that received federally guaranteed loans — US Airways, ATA Airlines and Aloha Airlines — filed for bankruptcy-court protection. About $1 billion in loans guaranteed by the government were at risk.

All three airlines survived and the ATSB will likely escape with a loss of only $10 million to $15 million on loan guarantees to ATA. Fees and earnings from stock sales at other airlines more than compensate, giving the taxpayer a solid return on its airline investments.

It’s not often that investors make money in airlines, though it certainly can be done. Financier David Bonderman turned a $66 million investment in Continental Airlines in 1993 into $780 million by 1998. More recently, America West and US Airways soared from a combined market value of $150 million a year ago to $3.8 billion now.

Congress was after stability not earnings when it created the ATSB on Sept. 22, 2001, 11 days after terrorist attacks. The government paid out $5 billion in cash to airlines to compensate for losses while the air-transport system was shut down. And it included the $10 billion loan program in case commercial loans weren’t available. The aid sent a signal that the government wouldn’t let the industry collapse.

But the program was controversial from the start. The ATSB drew fire from some as being too stingy and not helping enough airlines; it was criticized by others for helping too many airlines.

“The ATSB is choosing winners and losers in the industry,” Michael J. Conway, chief executive of National Airlines, said the day his airline shut down after being rejected for a guaranteed loan.

Jeffrey Shane, the Department of Transportation’s under secretary for policy and one of three members of the ATSB, says it’s not fair to criticize Congress for creating the loan program in the aftermath of 9/11, “but programs like that always end up distorting the market.”

Mr. Shane says that the loan program distracted airlines, diverting energy that could have been better spent addressing their financial and operational problems. Pursuit of an ATSB loan guarantee “sucked a lot of oxygen out of the executive suites of airlines,” he said. “Managers might have used their time more productively had the program not existed.”

Healthier airlines and others charged that ATSB was merely delaying consolidation and restructuring necessary for the industry to regain financial health. “Unlike prior business cycles when the likes of Eastern and Pan Am failed, it is chiefly the ATSB loan guarantee process that has placed on hold Charles Darwin’s evolutionary demise of the weakest,” consultant Robert W. Mann wrote in Aviation Daily, an industry trade publication.

The ATSB told airlines that to win guarantees, they had to present what the board considered to be viable business plans, and carriers had to show they didn’t have access to commercial capital markets. Applications were voted on by a representative from each of the DOT, Treasury and the Federal Reserve. The board did turn out to be a tough sell, one of the major reasons it ended up with a profit. Of the $10 billion of guarantees Congress authorized, the ATSB issued only $1.6 billion of guarantees.

Applications from seven airlines were rejected, including UAL Corp.’s United Airlines, which applied twice. Three carriers turned down ended up shutting down: Vanguard Airlines, Great Plains Airlines and Mr. Conway’s National. Some big carriers that have faced financial troubles recently, such as Delta and Northwest Airlines, didn’t apply for the loan program.

The guarantees also weren’t cheap. The ATSB decided that it should be compensated for the guarantees, collecting $220 million in fees from deals that were favorable to lenders because the government made them risk-free.

What’s more, the ATSB insisted on owning a piece of the airlines. In most cases, the board wanted a 10% ownership stake through stock warrants; in the case of America West, the government laid claim to 30% of the company’s common stock because the loans weren’t secured by any assets, so the risk of default was greater.

Bankruptcy wiped out stock ownership in US Airways, ATA and Aloha, but the ATSB sold its America West stake for a $110 million gain and expects an additional $25 million in gains from the sale of its World Airways and Frontier Airlines stock warrants, Mr. Dayton said. After expenses and its losses on the ATA loan, the net gain for taxpayers will be about $312 million — a 20% gain on the $1.6 billion taxpayers had at risk.

Mr. Shane says the terms were purposely tough to force carriers to fix their businesses and give executives incentive to refinance sooner rather than later to get out from under the government. “That’s why the ATSB should be able to close its doors as early as this summer,” he said. Then, “Uncle Sam will be out of the airline-finance business — I hope forever.”

Original Article

UPDATE 1-AMR leads airline shares down as oil prices climb

CHICAGO, May 30 (Reuters) – AMR Corp., parent of American Airlines, led airline shares lower on Tuesday as crude oil rose above $72 a barrel, signaling higher jet fuel prices.

AMR shares slid $1.93, or 7.4 percent, to $24.01, while Continental Airlines fell $1.37, or 5.4 percent, to $24.21 both on the New York Stock Exchange. Shares of UAL Corp., parent of United Airlines, dropped $1.59, or 5.1 percent, at $29.46 on Nasdaq.

The Amex airline index <.XAL> was down 3.2 percent.

“It’s got to be oil. Oil is up big,” said Morningstar analyst Chris Lozier. “The (airline) sector is all down.”

NYMEX crude oil futures <CLc1> were up 1.2 percent at $72.20 a barrel.

Airlines have been weakened by soaring fuel prices and low-fare competition that makes it hard for carriers to raise ticket prices enough to cover costs.

Low-cost carrier JetBlue Airways Corp. was the sector’s lone gainer, up 9 cents at $10.38 on Nasdaq after Merrill Lynch raised its rating on the stock to “neutral” from “sell.”

Original Article

AMR leads airline sector into the red as oil rises

SAN FRANCISCO (MarketWatch) — Airline stocks ended sharply lower on Tuesday as shares of American Airlines’ corporate parent led the decliners while JetBlue Airways shrugged off the brunt of the sector sell-off following a Merrill Lynch upgrade.

The Amex Airline Index (XX:$XAL: news, chart, profile) shed 3.9% to 47.28 points, with the price of crude oil closing just above $72 a barrel as traders look to the meeting of the Organization of Petroleum Exporting Countries in Caracas later this week for any move on production quotas.

JetBlue Airways  (JBLU:JBLU9.67, -0.07, -0.7% ) fell 0.3% to $10.26. JetBlue was upgraded to neutral from sell as Merrill analyst Michael Linenberg said he believes investor concerns, such as increased competition, introduction of a second type of aircraft and other corporate growing pains, have already been priced into the stock.

“Furthermore, we think management is moving quickly to address these issues and anticipate some early ‘wins’ as the ‘return to profitability’ plan takes hold,” he said.

Original Article

Airline passenger data deal illegal, court rules

But not on privacy grounds…
By Lars Pasveer

Published: Tuesday 30 May 2006

A 2004 deal between the European Union and the US has been deemed illegal by the European Court of Justice in Luxemburg.

The European parliament had issued no less than six pleas surrounding the exchange of so-called Passenger Name Records (PNR).

The PNR deal was struck two years ago between the European Commission and the US government, despite opposition by the European parliament. Airlines were forced to release data originally deemed private under European law or face having their US landing rights revoked.

The Luxembourg Court has now ruled the original deal falls outside European Community law and concluded it should therefore be annulled. The PNR data exchange must end on 30 September 2006. Airlines claim to have invested millions to make their computer systems suitable for the required transfers.

The so-called ‘no fly lists’ compiled with such data – supplemented by credit card records – have in recent years forced flights to return to Europe or divert to Canada.

Of the six pleas, the court only reviewed the first, looking at the legal grounds on which the EC entered into the agreement.

European parliament members had hoped the courts would give a verdict on privacy issues – but the court has decided not to. Now that the agreement has been annulled the court simply states: “It is not necessary to consider the other limbs of the first plea or the other pleas relied upon by the parliament.”

Original Article

Aer Lingus chief says airline likely to be privatized in September

DUBLIN, Ireland (AP): Ireland’s state-owned airline, Aer Lingus, is likely to be privatized in September in a long-awaited move, its chief executive said Tuesday.

“We are continuing to aim for a transaction in September, and we’re moving ahead with the documentation necessary to achieve it,” Dermot Mannion said.

Mannion said recent volatility in the stock market, and the unprecedented high cost of aviation fuel, would not delay the expected flotation on the Irish Stock Exchange.

“The important point is we believe we have a very robust business case that will be attractive for national and international investors. We are the most efficient state carrier in Europe. We’re operating in the most competitive market in the world for airfares. I believe the transaction will complete in September,” he said.

Aer Lingus is one of Europe’s rare success stories among state-owned airlines. It came close to bankruptcy in 2002, but rebounded strongly by slashing its payroll in half, shifting ticket sales to the Internet, and developing a network of short-haul destinations to continental Europe _ essentially copying the winning formula of its Dublin-based rival, Ryanair.

But Aer Lingus directors argue that the airline would fare better in private hands, because European Union competition rules heavily restrict the ability of Ireland to invest taxpayer money in new aircraft. The airline in particular wants to buy new long-haul Boeing or Airbus aircraft to expand its route network to the United States and, possibly, Asia.

The government of Prime Minister Bertie Ahern has spent the past five years debating when, and how, to sell off Aer Lingus.

Earlier this year, Ahern said the government wanted to proceed sometime this year, and signaled that a stock flotation, rather than a sale to a group of private investors, was the government’s preferred option. In a bid to reassure union leaders, Ahern said the government would retain a sufficiently large percentage of ownership to block any sale to a foreign company.

Aer Lingus also announced Tuesday it planned to end its membership in the eight-airline Oneworld alliance by early next year. The alliance, formed in 1999, allows participating airlines to share flight codes for joint ticketing and its customers to collect frequent-flyer miles on all alliance flights.

Aer Lingus said it did not want to invest an estimated euro2 million (US$2.6 million) in upgrading its computer systems to handle a growing Oneworld record-keeping burden when the alliance admits three new members _ Japan Airlines, Malev Hungarian Airlines and Royal Jordanian _ by 2007.

Mannion said Aer Lingus was interested in negotiating individual code-sharing and frequent-flyer agreements with its most logical partners, such as British Airways and American Airlines, but saw little benefit in cooperating with airlines distant from core Aer Lingus services. He said only 6 percent of Aer Lingus customers were buying tickets with connections onto other Oneworld alliance airlines.

“Now is the right time to make the break and go forward with bilateral relations,” Mannion said.

Original Article