CCI sees no evidence of collusion by IndiGo, others in price fixing: Report

CCI in 2015 ordered a probe into allegations of anti-competitive practices after similar fares were being offered on certain routes by IndiGo, SpiceJet , GoAir, state-run Air India and Jet.

Investigators with India's antitrust watchdog have found no evidence that the country's biggest airline, IndiGo , and four rival carriers colluded to fix ticket prices, three sources with direct knowledge of the matter told Reuters.

The Competition Commission of India (CCI) in 2015 ordered a probe into allegations of anti-competitive practices after similar fares were being offered on certain routes by IndiGo, SpiceJet , GoAir, state-run Air India [AIN.UL] and now-defunct Jet Airways .

The CCI inquiry, which included an analysis of the algorithms airlines to determine ticket fares, found that all five airlines were working independently, the three sources said.

"No direct evidence of cartelisation was found," said one of the sources, who added the investigation also did not reveal any communication amongst airline executives to fix prices.

Budget airline IndiGo, the country's biggest carrier, said in a statement "the case is without merit" and added that it has been cooperating with the investigation.

The second-biggest airline, SpiceJet, GoAir, Air India and Jet Airways did not respond to a request for comment. The CCI did not respond to questions from Reuters.

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An adverse finding could have led to a fine of up to three times the profit made in each year prices were fixed, or 10% of annual revenue, whichever is higher. Indian airlines are already grappling with slow growth in air traffic.

Details of the CCI case, which was investigated in two phases, have not been made public in line with the watchdog's practice.

The agency, whose senior members are reviewing the investigation findings, has not made a final ruling and could further extend the investigation. But two of the sources said the airlines were likely to be cleared.

DGCA tells IndiGo to replace unmodified P&W engines in Neo aircraft

People in the know said the move would impact around 110 engines, virtually putting a spanner on the expansion plans of IndiGo - counted among the fastest growing airlines in the world.

The aviation regulator on Monday barred the country’s largest carrier, IndiGo, from operating Airbus A320 and 321 Neo aircraft having turbine blades built with titanium, which is prone to damage leading to mid-air engine shut down. The airline will have to replace such aircraft with those having sturdier engine turbine blades built with nickel-chromium alloy, according to a directive issued by the Directorate General of Civil Aviation (DGCA).

People in the know said the move would impact around 110 engines, virtually putting a spanner on the expansion plans of IndiGo — counted among the fastest growing airlines in the world. The engines manufactured by Pratt & Whitney have been facing issues since induction in 2016.

IndiGo, in the last one year, has faced 13 such incidents including four incidents in a single week in October.

The airline will now have to slow down launching new routes, adding frequency as the new aircraft will be used to replace the grounded aircraft.

The extent of disruption will depend on how fast Pratt & Whitney can deliver the new engines but industry sources suggested that replacing 109 engines will impact IndiGo’s operations for close to a year. The airline during its post-results call had said that it intends to grow capacity by 25 per cent.

“Every aircraft that is added to the existing fleet should lead to one of those with unmodified engines to be grounded and the new aircraft may be operated on the same schedule as was being operated by the grounded aircraft,” a DGCA statement said.

Currently, the airline has 98 A320 and 321 Neo aircraft, of which 52 have modified engine blades. An IndiGo spokesperson, however, said as of now IndiGo was not changing any schedule. “The current schedule remains intact. The airline is working with Pratt and Whitney and Airbus to adjust the flow of engines,” the spokesperson said.

The direction from the regulator comes after a review meeting on Monday. DGCA has found that IndiGo was unable to convince the regulator that it would be able to replace all the unmodified engines by January 31, 2020 — a deadline fixed earlier.

Business Standard

Jet example shows that Indian capitalism needs to be saved from capitalists

It's lamentable that after 14 years as a publicly traded firm, operating in a capital-intensive, competitive, regulated industry, Jet was still allowed to carry on basically as Goyal's fief.

The grounding of Jet Airways India Ltd., the country's oldest private-sector carrier, isn't just bad news for customers and its 23,000 employees. It raises yet again a question that's puzzled two successive governments and will continue to bedevil whichever party takes power after elections conclude next month: What's killing capitalism in India?

Jet was born in the early 1990s, when India's closed Soviet-style planned economy had just started embracing globalization and private enterprise. Back then, few Indians could afford to fly; now the country has the world’s fastest-growing aviation market. An airline that was at one point the industry’s dominant player should theoretically have been able to thrive.

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While Jet’s costs were too high compared with those of its no-frills rivals, that issue could have been fixed. The real problem is that Jet founder Naresh Goyal gambled away a perfectly fine — albeit, unprofitable — airline by not injecting equity himself into the cash-strapped business, or stepping aside in time and allowing someone else to do so.

It’s only natural for entrepreneurs to be possessive and irrational, especially when — like Goyal — they’ve been so wildly successful for so long. The bigger conundrum is why providers of outside capital (banks and capital markets) didn’t act as a disciplining force on Goyal and save the business.

Despite Abu Dhabi’s Etihad Airways PJSC taking a 24 percent stake in the airline in 2013, Jet has been slipping deeper into negative equity for seven years. Had India’s state-run banks insisted on a timely and substantial capital infusion, and had they credibly threatened to dilute Goyal’s 51 percent controlling stake by issuing themselves new shares when the inevitable debt default occurred, Jet would now be flying under a new owner.

When Jet's rival Kingfisher Airlines Ltd. collapsed in 2012, India didn't have a modern bankruptcy law. Now it does. Even so, in Jet’s case — or in the high-profile $7 billion insolvency of tycoon Anil Ambani’s Reliance Communications Ltd. — creditors didn’t utilize that option. Instead they foolishly relied on entrenched insiders to make things right, thereby hurting their prospect of extracting value.

Banks are now awaiting a white knight. Yet for a new owner to revive the airline after it has stopped flying will necessarily mean very deep haircuts on its $1 billion of net debt. State-run lenders will lose heavily, as will employees. It’s an unnecessary waste of capital and jobs in a country that doesn’t have enough of either.

So what’s to be done? Private investment in India has been weak for years now, first under a Congress Party-led coalition and then under Prime Minister Narendra Modi’s Bharatiya Janata Party