India Crypto Exchange

Best Bitcoin Trading Platform

Tag Archive : airlines

Fly more, pollute less: The great aviation conundrum

The aviation sector is facing a great dilemma: How can it fulfil its ambition of doubling passenger numbers while meeting its goal of reducing its massive greenhouse gas emissions?

Slashing pollution from the industry is among the major challenges facing the world as leaders meet later this month for a key climate summit in Britain.

How bad is it?
Airlines transported 4.5 billion passengers in 2019, belching out in the process 900 million tonnes of CO2, equivalent to two percent of total global emissions.

Passenger numbers are projected to double by 2050, meaning a parallel doubling of CO2 if no action is taken.

While the sector has sought to increase carbon efficiency, it has increasingly faced pressure from environmentalists and social movements such as “Flygskam” (“flight shame“), which appeared in Sweden in 2018.

Between 2009 and 2019, carriers improved their energy efficiency by 21.4 percent, according to the International Air Transport Association (IATA). But that was not enough to prevent the sector’s emissions from rising.

What are the pledges?
The IATA committed itself earlier this month to zero net emissions of CO2 by 2050, after having previously targeted a cut of just 50 percent.

A group representing European airlines, airports and aerospace companies has made a similar commitment.

At state level, the European Union hopes to cut emissions by 55 percent compared with 1990 levels by 2030, aviation included.

The United States intends to slash the sector’s emissions share by a fifth by the end of this decade.

What’s the flight plan?
The European group of airlines, airports and aerospace companies hopes half the emissions targets can be met with more fuel-efficient engines, the emergence of hydrogen and electric propulsion, and a better management of air traffic.

But the IATA says such measures would contribute to just 14 percent of the effort.

Plans to reach the net zero target also rely on carbon offsetting schemes, such as planting trees, which NGOs say do not address the problem.

Role of sustainable fuel
“If there’s a ‘silver bullet’ to decarbonising aviation, it’s sustainable aviation fuels (SAF),” says Brian Moran, Boeing’s vice-president of sustainability public policy.

The IATA hopes to accomplish two-thirds of its emissions reductions by using SAFs — non-conventional fuels derived from organic products including cooking oil and algae.

The European Commission will require that SAFs account for at least two percent of aviation kerosene by 2025, rising to five percent by 2030 and 63 percent by 2050.

Aviation giants Boeing and Airbus say their planes will be burning 100 percent SAFs by the end of this decade.

SAFs, which is four times more expensive than kerosene, accounted for less than 0.1 percent of the fuel used in aviation in 2019.

The United States is proposing a tax credit to encourage SAF use while the EU wants to put a new levy on kerosene for flights within the 27-nation bloc.

Is it doable?
Biomass fuels are a limited resource.

“We have estimated that by 2050, advanced biofuel from residue (will) allow for covering (just) 11 percent of aviation’s needs,” says Jo Dardenne of the European NGO federation Transport et Environnement (T&E).

The aviation sector is also betting on synthetic fuels, or e-fuels, made with hydrogen produced from renewable sources of energy and with CO2 captured from the atmosphere.

E-fuels are supposed to be the main type of SAF in the future.

But Timur Gul, head of energy technology policy at the International Energy Agency, says replacing just 10 percent of oil-based jet fuel with e-fuels would require the equivalent of electricity production from Spain and France combined.

Dardenne says the technologies being considered to reduce emissions require a lot of energy. What is needed, he says, is to “reduce demand” — meaning to fly less.

IndiGo sees Tata as ‘formidable competition’ after Air India deal

India’s largest airline

IndiGo

expects Tata Sons to be “formidable competition” once the conglomerate finalises its $2.4 billion purchase of Air India from the government, the budget airline’s chief executive said.

Tata also owns a majority stake in Vistara, a premium joint venture with Singapore Airlines Ltd, as well as budget airline AirAsia India.

“I see them as formidable competition but I welcome them. It is a sensible thing,” IndiGo CEO Ronojoy Dutta told a CAPA Centre for Aviation event on Wednesday, in a pre-recorded interview.

The government announced on Friday that Tata would resume control of Air India, marking the end of years of struggle to privatise the financially troubled airline.

“I think they will become more economically responsible,” Dutta said of Air India. “Having a large player funded by taxpayers is not fair competition for us.”

IndiGo controls more than half of the Indian domestic market but its international operations are far smaller than Air India’s.

Dutta said IndiGo was focused on flights within seven hours of India using narrowbody planes, while Air India was more focused on full-service long-haul operations, leaving plenty of room in the market for both.

In the domestic market, low-cost carrier Akasa Air, backed by billionaire Rakesh Jhunjhunwala, expects to take to the skies next year.

One of Akasa’s co-founders, Aditya Ghosh, spent a decade with IndiGo and was credited with its early success.

Dutta said he viewed Akasa as less of a competitive threat than Tata’s airlines over the next two to three years because it would take time for the new entrant to build up operations.

IndiGo sees Tata as ‘formidable competition’ after Air India deal

India’s largest airline

IndiGo

expects Tata Sons to be “formidable competition” once the conglomerate finalises its $2.4 billion purchase of Air India from the government, the budget airline’s chief executive said.

Tata also owns a majority stake in Vistara, a premium joint venture with Singapore Airlines Ltd, as well as budget airline AirAsia India.

“I see them as formidable competition but I welcome them. It is a sensible thing,” IndiGo CEO Ronojoy Dutta told a CAPA Centre for Aviation event on Wednesday, in a pre-recorded interview.

The government announced on Friday that Tata would resume control of Air India, marking the end of years of struggle to privatise the financially troubled airline.

“I think they will become more economically responsible,” Dutta said of Air India. “Having a large player funded by taxpayers is not fair competition for us.”

IndiGo controls more than half of the Indian domestic market but its international operations are far smaller than Air India’s.

Dutta said IndiGo was focused on flights within seven hours of India using narrowbody planes, while Air India was more focused on full-service long-haul operations, leaving plenty of room in the market for both.

In the domestic market, low-cost carrier Akasa Air, backed by billionaire Rakesh Jhunjhunwala, expects to take to the skies next year.

One of Akasa’s co-founders, Aditya Ghosh, spent a decade with IndiGo and was credited with its early success.

Dutta said he viewed Akasa as less of a competitive threat than Tata’s airlines over the next two to three years because it would take time for the new entrant to build up operations.

India amends its accounting standards, major relief for entities like airlines & retail chains

India has amended the accounting standards to provide relief to companies that received concessions on their rentals after Covid-19 outbreak.

Changes to the Indian Accounting Standards (Ind AS) will allow companies to show the benefit in their profit and loss (P&L) account. The move comes as a huge relief for airlines or retail chains that have many assets or properties on hire.

Until now, if any terms and conditions of an existing lease contract changed, then it would have to be treated as a new lease contract. This meant that if a company got a rental concession for one year in a ten-year contract, the benefit would have to be reworked to reflect its present value, which would be lower than the current value.

The latest amendment does away with the need for such recalculations, and the benefit can be taken into the P&L for the current period, simplifying the accounting to a great extent.

The relaxation on rental concession accounting is especially beneficial to companies that have many assets or properties on hire, such as airlines or retail chains, insurance companies and banks, according to Shalu Kedia, director at Nangia and Co.

“This would also improve the profitability of a company,” Kedia added.

The changes, which went through the Institute of Chartered Accountants of India (ICAI) and the National Financial Reporting Authority (NFRA) before being notified, were part of annual refinements made to align Ind AS with the International Financial Reporting Standards (IFRS).

The ministry of corporate affairs (MCA) has also amended the definition of business combinations and material items to remove ambiguities, while exempting hedges from being classified as ineffective on the basis of interest rate benchmark reform.

Interest rate benchmark reform
The exemption in hedge accounting will mostly benefit multinational companies that take foreign currency loans from their parent companies. To protect against losses arising from exchange rate differences, these companies hedge their loan repayments using forward contracts.

The interest on these contracts are based on interest rate benchmarks such as the interbank offered rate (IBOR). The decreasing usage and risk incorporated in these benchmarks have made them unreliable, which essentially weakens the basis of hedge contracts, and calls for a change in the benchmark itself.

In terms of hedge accounting, this would render a hedge ineffective. “When a cash flow hedge is determined to be ineffective, the entire loss has to be carried to the P&L account immediately, which would have a significant impact on financial statements,” said Abuali Darukhanawala, partner at ZADN and Associates.

The amendment allows for the use of existing benchmarks until a new one is released, preventing the booking of unrealised exchange losses.

Material Items
A material item was earlier defined as any information that would have a significant impact on a company’s financial statement. The amendments have enhanced this definition to include any information which if omitted, misstated or obscured, “could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.”

This has resulted in another change that requires companies to disclose in their financial statements, any material event or transaction that occurred from the last date of FY20, till the signing of the balance sheet. This even though it does not affect company finances for the accounting year ending on March 31, 2020.

“This has been done to include any material event arising from the Covid-19 impact such as the downfall in revenue, any force majeure clauses affecting the company or the termination of a key customer agreement. Apart from a qualitative disclosure, it has to be quantitative also,” Kedia said.

Although this will not affect FY20 numbers of a company, it would ensure that companies were aware of the Covid-19 impact, which would be material for the users of the financial statement.

Chinese carrier Sichuan Airlines stopping flights may hit pharma imports, says industry

The disruption to Chinese carrier Sichuan Airlinescargo services to India may seriously hit the imports of crucial medical supplies like oxygen concentrators and key raw materials, a pharma lobby group has said.

Citing that the decision by the Chinese owned airlines suspending its cargo services to India for 15 days “worrisome”, the Indian Drug Manufacturers’ Association (IDMA) has written to the external affairs ministry to intervene.

The IDMA said the pharma industry is struggling hard to meet the global commitments during the second wave of Covid and the decision of Chinese state-owned Sichuan Airlines to suspend its cargo services to India for 15 days is worrisome in addition to the enormous increase in freight and shortage of containers.

It said that the decision is likely to disrupt efforts by the Indian pharma industry to import medical supplies including oxygen concentrators as well as the key starting materials (KSM)/active pharmaceutical ingredients (

APIs

) required to manufacture finished formulations.

Top 100 wilful defaulters owe lenders Rs 84,632 crore

The country’s top 100 wilful defaulters owe Rs 84,632 crore to banks as of March 2020, with top 10 including

Gitanjali Gems

, Winsome Diamonds & Jewellery and

Kingfisher Airlines

accounting for 32% of it, data from Reserve Bank of India shows.

While banks wrote off nearly three-fourth of it to clean their balance sheet and get tax benefits, the default borrowers continue to appear in RBI’s internal CRILC database till they clear the default, people familiar with the matter said.

The total size of top 100 wilful defaults rose 5.34% in FY20 from Rs 80,344 crore as of March 2019, according to data shared by RBI in response to an application under the Right to Information (RTI) Act.

Mehul Choksi-owned Gitanjali Gems topped the wilful defaulters list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore.

The top 10 wilful defaulters include another jewellery maker Forever Precious Jewellery, and Vijay Mallya’s Kingfisher Airlines.

Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as on March 2020, data shared with RTI activist Biswanath Goswami showed.

PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.

State Bank of India had Rs 1,875 crore dues from top 10 wilful defaulter ABG Shipyard with the bank writing off the entire amount. Uco Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off.

Write-off are accounting entries for shifting NPAs from active balance sheet to off-balance sheet accounts. These are backed by 100% provision and therefore any recovery from these accounts adds to net profit.

RBI collects credit data from banks monthly, with data on defaults being collected on a weekly basis. The regulator has mandated banks to provide fully against NPAs older than four years and allowed to write these old NPAs off. The reduction in NPAs during FY20 was largely driven by write-offs, RBI had said in its latest report on Trend & Progress of Banking in India. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier.

( Originally published on Feb 08, 2021 )

Dark deja vu for European economy as coronavirus cases spike

London: Europe’s economy was just catching its breath from what had been the sharpest recession in modern history.

A resurgence in coronavirus cases this month is a bitter blow that will likely turn what was meant to be a period of healing for the economy into a lean winter of job losses and bankruptcies.

Bars, restaurants, airlines and myriad other businesses are getting hit with new restrictions as politicians desperately try to contain an increase in infection cases that is rapidly filling up hospitals.

The height of the pandemic last spring had caused the economy of the 19 countries that use the euro to plunge by a massive 11.8% in the April-June quarter from the previous three-month period. About 1.5 million more people registered as unemployed during the pandemic. The damage was contained only by governments’ quick decision to spend hundreds of billions of euros (dollars) to keep another 45 million on payrolls and companies running.

While the new restrictions are so far not as drastic as the near-total shutdown of public life imposed in the spring, they are kicking an economy that’s down. For many Europeans, there is a foreboding sense of deja vu.

It is a disaster, says Thomas Metzmacher, who owns a restaurant in Germany’s financial hub, Frankfurt, of the government’s decision to impose an 11 p.m. curfew. He noted that even before the new restrictions many people in his industry could only just about survive. The curfew means people who come in for a meal don’t linger for a few extra beers or schnapps, which is where restaurants make most of their profits. “Now it is: go for a meal, finish your drink, pay, go home, he says. Experts say that the global economy’s course depends on the health crisis: Only when the pandemic is brought under control will it recover.

Countries like China, which have so far avoided a big resurgence like Europe, are faring better economically. The U.S. never quite got its first wave under control and its economy remains hobbled by it.

Europe had reduced the number of infections much faster than the U.S. and managed to keep a lid on unemployment. But the narrative that contrasted Europe’s successes against the Trump administration’s failure to subdue the pandemic is being quickly revised.

As coronavirus cases rise anew in Europe, economists are slashing their forecasts. Ludovic Subran, the chief economist at financial services firm Allianz, says there is a high risk that the economies of France, Spain, and the Netherlands will contract again in the last three months of the year. Italy and Portugal are also at risk. While Germany is seeing an increase in infections, too, it is not as bad and the economy appears more resilient.

We see an elevated risk of a double dip recession in countries that are once again resorting to targeted and regional lockdowns, he said.

The pandemic is worsening just as governments were trying to ease off the massive amounts of financial support they have been giving households and business owners.

Many governments have programs where they pay the majority of salaries of workers who are redundant in the hope that they will be able to quickly get back to work after the pandemic. In France and Britain that covered a third of the labor force at one point, and 20% in Germany. They also gave cash handouts to households and grants to business owners.

Now governments are phasing out some of that support and aiming to provide more targeted aid to people directly affected by new restrictions. That will not help people whose jobs are affected indirectly. A pub facing a curfew, say, would be eligible to get wage support for its staff but the brewery supplying it might not.

The impact will vary between countries” while Britain is shifting to a less-comprehensive wage support plan, Germany has extended its program.

As with the pandemic’s initial surge in the spring, the sectors in Europe most affected by limits on public life are services including travel and hospitality” those that depend most on face-to-face contact between people.

Countries like Spain, Portugal and Greece rely heavily on tourism. It accounts for almost 12% of Spain’s economy, compared with less than 3% for the U.S. and about 7% for France.

Major airlines in Europe expect to operate at about 40% of normal levels this winter and are again cutting the number of flights. Lufthansa, British Airways and others are cutting tens of thousands of jobs as they expect no quick return to how things were before the pandemic” even with government aid.

Even where there are no hard restrictions, the health hazard scares customers away, so shops are likely to see less business.

The EU is giving 750 billion euros ($880 billion) in financial support to member countries to cope with the fallout. Governments like Spain’s were planning to invest in long-term projects such as renewable energy and technology. It now appears they will have to spend more on just keeping the economy afloat.

The European Central Bank is injecting 1.35 trillion euros ($1.6 trillion) into the economy, which keeps borrowing cheap even for countries with weak finances like Spain and Italy.

Airlines are making money selling everything but tickets

By David Fickling

With hopes that their season in hell could be approaching an end, airline stocks are on a tear.

Shares in Singapore Airlines Ltd. jumped the most in 21 years Tuesday while those in Cathay Pacific Airways Ltd. were up the most since 2008 after Singapore and Hong Kong announced the opening of a travel bubble starting Nov. 22. News of successful trials of a Pfizer Inc. and BioNTech SE coronavirus vaccine pushed the Bloomberg World Airlines Index up 9.7% Monday in anticipation of an ebbing tide of pandemic.

Bloomberg

The cavalry better come quickly. Right now, much of the industry is running short of rations.

With traffic down 73% from a year earlier in September — and international flights running at just 12% of their levels a year ago — the usual path for companies to bring in cash by eking out a margin on their revenue is still blocked. That could remain the case well into next year, given the likely bottlenecks to producing and distributing vaccines in quantities sufficient to reopen international travel.

Still, there’s more than one way to provision your army. If you can’t sell plane tickets, you can still try everything else that’s not nailed down.

Bloomberg

The first thing companies try to sell in a crisis are bits of paper. Airlines have issued $88 billion in bonds so far in 2020, more than half of the $153 billion that the industry sold over the previous four decades put together, according to data compiled by Bloomberg. Throw in the value of loans taken out and airlines’ total debt is up by $124 billion since the end of February, the data show.

It’s a similar picture on the equity side.

Japan Airlines Co. last week announced plans to raise as much as $1.6 billion by issuing shares equivalent to about a third of the existing register. Singapore Airlines’ $6.5 billion rights issue in June represents the biggest raising of additional equity by any airline in history. The $27 billion in new shares issued by the industry as a whole this year is equivalent to all the cash raised through that route over the previous six years put together.

Bloomberg

In aggregate, all the new debt and equity sold by the world’s carriers this year amounts to nearly two-thirds of the $241 billion that the International Air Transport Association expects the industry to collect in passenger revenue through the whole year.

Companies that own fleets of high-value transport equipment have other ways to get cash, too. EasyJet Plc raised $170 million this month from the sale and leaseback of 11 of its planes to aircraft leasing companies. Air Canada last month took in $365 million from a similar move and Wizz Air Holdings Plc and United Airlines Holding Inc. have done the same.

The fundraising effort has been titanic. Compare the revenue of some of the world’s largest airlines in the most recent quarter with their cashflows from finance and investing, minus the capital expenditure that airlines usually have to commit well in advance, and you can see the picture clearly:

Bloomberg

Typically airlines should see cash outflows from finance and investing offset with an inflow from operating activities. That’s what you have with Chinese carriers, which have returned to some semblance of normality in recent months with the suppression of Covid-19. Elsewhere in the world, however, working the balance sheet has often been bringing in more money than selling transport services.

You might regard that flexibility as a hopeful sign — but as we’ve argued, a miserable third quarter is likely to lead to a grim winter for airlines. Chances are there’s far more to come in terms of bankruptcies and restructuring. Getting the industry out from under its Covid-induced debt load could take the best part of a decade.

Furthermore, while demand for tickets from air passengers is more or less an inexhaustible resource, there are only so many assets that a carrier can sell and lease back before it runs out. The orgy of bond and stock issuance this year is also likely to be leading to sharply diminishing appetites among creditors and shareholders.

In spite of the slump in share prices, investors still show a surprising amount of enthusiasm for airlines. If only passengers felt the same way.

Airbus lost $1.3 billion amid pandemic; expects better 2021

PARIS: European plane maker Airbus lost 1.1 billion euros (USD 1.3 billion) last year amid an unprecedented global slump in air travel because of the pandemic, but expects to deliver hundreds of planes and make a profit in 2021 despite uncertainty about when people will resume flying en masse.

Airbus is also pushing to negotiate a “cease-fire” soon in its years-long trade dispute with U.S. rival Boeing, amid hopes that the Biden Administration will be more amenable than Trump‘s government to a deal.

The dispute has led to billions of dollars in tit-for-tat cross-Atlantic tariffs on planes, cheese, wine, video games and other products.

Airbus CEO Guillaume Faury acknowledged Thursday that the company’s performance last year was “far from expectations” and had to constantly adapt as airlines grounded planes – or folded altogether – because of travel restrictions.

Airbus announced in June that it would cut 15,000 jobs, mostly in France and Germany.

“The crisis is not over. It is likely to continue to be our reality throughout the year,” Faury said. “Airlines will continue to suffer” and to “burn cash,” he warned.

Airbus doesn’t expect the industry to recover to pre-pandemic levels until 2023-2025, and when it does, Airbus predicts that environmental concerns will be ever more important to passengers and airlines, so it’s increasing investment in hydrogen and lower-emissions aircraft.

Airbus sales were down to 49.9 billion euros from 70 billion euros the year before.

The company also reported a loss in 2019 because of a major multinational corruption settlement.

Airbus delivered 566 aircraft last year and expects to deliver about the same number this year, the company said. It took in 268 commercial plane orders, down from 768 the year before.

Both figures were well down from normal recent years, but above those from struggling Boeing.

Boeing Co. got a bump in orders and deliveries of new planes in December, but it wasn’t enough to salvage the year.

It notably suffered from continuing cancellations of its 737 Max jet, which was grounded for 21 months after crashes in Indonesia and Ethiopia killed 346 people.

With both plane makers facing a long and difficult recovery, the Airbus chief executive called the U.S.-EU tariffs a “lose-lose situation” for everyone.

The tariffs stem from a dispute over state subsidies to both Airbus and Boeing that each side calls unfair.

After trade tensions worsened under Trump’s presidency, Faury said, “We believe the situation is in place to start with a cease-fire, to suspend tariffs, to hold negotiations and move forward.”

Airbus welcomed one bit of good news last year: a negotiated agreement between Britain and the EU to reduce trade disruptions after Brexit was finalised December 31.

Faury insisted Thursday that Airbus’ U.K. plants “have a very, very important role to play moving forward for Airbus.”

Overall, however, the outlook remains bleak for the aviation industry.

Also Thursday, Air France-KLM announced it plunged to a 7.1 billion euro (USD 8.5 billion) loss in 2020, as travel restrictions and worries caused a 67 per cent fall in passenger numbers at the French-Dutch airline.

CEO Ben Smith said the carriers now are looking for an improvement in 2021 “as soon as vaccination is deployed on a large scale and borders once again reopen.”

Boeing posts $8.4 billion loss on weaker demand for planes

Boeing lost $8.4 billion in the fourth quarter _ capping a record loss for all of 2020 _ as the pandemic undercut demand for planes, and the company announced another costly delay to its new large jetliner designed for long-haul flights.

Most of Boeing’s troubles over the past two years have swirled around the troubled 737 Max. However, the biggest piece of the fourth-quarter loss reported Wednesday was a pretax charge of $6.5 billion tied to a different plane, the bigger 777X.

It all added up to a record full-year loss of $11.94 billion.

“2020 was a year of profound societal and global disruption which significantly constrained our industry,” CEO David Calhoun said in a statement. “The deep impact of the pandemic on commercial air travel, coupled with the 737 Max grounding, challenged our results.”

Boeing shares were down more than 3% in trading before the market opened.

Orders for new Boeing jets have tanked in the past two years, first from the worldwide grounding of the Max after two crashes that killed 346 people, then from a pandemic that devastated the airline industry. In the last few months, production flaws have halted deliveries of the 787, which Boeing calls the Dreamliner.

Deliveries have also plummeted, starving Boeing of much-needed cash. Boeing delivered 59 commercial planes in the fourth quarter, compared with 225 for European rival Airbus. Boeing’s fourth-quarter revenue fell 15% to $15.3 billion.

Boeing’s newest problem involves the 777X, a larger version of the long-range 777 that will feature new engines and composite wings that fold near the wingtips to accommodate limited space at many airport gates.

The company said Wednesday that the first 777X delivery will occur in late 2023, three years behind the original schedule and a year later than Boeing announced just six months ago. Boeing cited new, tougher standards for certifying planes _ an outgrowth of the Max crisis _ and the damage that the pandemic is doing to demand for international travel.

The 737 Max, a mid-size plane used mostly on short and medium-range flights, only recently returned to flying after being grounded worldwide for 20 months. Five carriers including American Airlines have resumed using the Max and have flown more than 2,700 flights since early December.

This month, Boeing Co. avoided criminal prosecution over the Max by agreeing to pay $2.5 billion and admit that two former employees misled regulators about the plane’s safety. Family members of passengers who died in the crashes complained about the settlement, most of which Boeing had already set aside to pay airlines.