X posted from India-US Strategic News and Discussion thread
FAA Downgrade May Hurt Air India, Jet Airways Alliances
Jan. 14--NEW DELHI -- India's two biggest airlines, state-run Air India Ltd and Jet Airways (India) Ltd, could be worse hit than previously thought and may lose their code-sharing privilege on US routes if the US aviation regulator downgrades India's air safety ranking over the coming fortnight.
The airlines will have to snap ties with American counterparts -- a move that may have an impact on Air India's entry into the prestigious Star Alliance and Jet Airways' plan to integrate its network with that of Abu Dhabi-based Etihad Airways PJSC, which has bought a stake in it.
As known earlier, Air India and Jet Airways would be barred from increasing flights to the US if the Federal Aviation Administration (FAA) downgrades India's air safety ranking to so-called Category II. The FAA in December inspected the Directorate General of Civil Aviation (DGCA) to determine if it had taken action to correct 33 deficiencies that came to light in a September audit.
The two airlines' existing flights would also be subjected to additional checks at American airports.
Air India announced last year that it would be joining Star Alliance, the biggest club of world airlines. Jet, which sold a 24% stake to Etihad Airways for $379 million, plans to align its network with that of Etihad, especially for passenger traffic to the US and Europe.
While a downgrade, if at all it happens, does not reflect on the safety of India's airlines -- the rankings measure the ability of the Indian regulator to follow safety procedures and not that of the airlines -- India risks being perceived in a negative light.
A Category II safety rating means the civil aviation authority does not comply with International Civil Aviation Organization standards and is deficient in one or more areas, such as technical expertise, trained personnel and record-keeping or inspection procedures, according to FAA.
India warns US over FAA safety downgrade
New Delhi: India has warned the US to expect retaliation if the US aviation regulator, the Federal Aviation Administration (FAA), downgrades the country’s air safety rankings. Retaliatory action could include a year’s embargo on the delivery of Boeing Co.’s 787 Dreamliner aircraft to Air India Ltd.
The FAA has decided to inspect India’s Directorate General of Civil Aviation (DGCA) in December again for compliance with corrective measures on 33 deficiencies that came to light in a September audit of the Indian regulator.
It could possibly downgrade India’s safety rankings to category II from category I after the audit. A category II safety rating means the civil aviation authority does not comply with International Civil Aviation Organization standards and is deficient in one or more areas, such as technical expertise, trained personnel and record-keeping or inspection procedures, according to FAA.
Indian airlines won’t be able to increase flights to the US and additional checks will be imposed on existing flights of Air India and Jet Airways (India) Ltd if a downgrades takes place. It may also hurt airlines like Singapore Airlines Ltd and AirAsia Bhd that have proposed joint ventures with Tata Sons Ltd and may want to fly to the US.
The matter escalated between the two sides over the past one month. An Indian delegation led by aviation minister Ajit Singh, which was in Washington for the fourth India-US Aviation Summit in Washington on 30 October, was given indications during meetings with US officials that a downgrade can’t be ruled out, according to two government officials who declined to be named.
“There will be an equal and befitting response which will include a one-year ban on delivery of any new Boeing’s Dreamliners for Air India,” said one of the two officials.
A downgrade of India’s air safety rankings will mean that Boeing, General Electric Co., maker of the engines that power the Dreamliner, and Honeywell International Inc., which manufactures other components that go into the jet plane, and “others will all suffer,” this official said.
“It has been communicated to them informally,” the official said.
An email sent to Boeing on Sunday remained unanswered.
A spokeswoman for FAA declined to comment on whether it has communicated with India on a possible downgrade through diplomatic channels. On Thursday, the spokeswoman had said, “The only thing I can confirm is that the FAA is continuing consultations with the civil aviation authority of India.”
Boeing has a $6 billion order from Air India for 27 Dreamliners of which less than a dozen have been delivered to the state-owned airline.
Only 14 of the 27 aircraft have been cleared by the government to be inducted into Air India so far as part of a turnaround plan for the airline in which the government is infusing nearly $6 billion. A decision on the induction of the remaining 13 Dreamliners is expected to be taken in 2014 by the government.
To be sure, the threatened embargo on the delivery of the remaining planes may not come to pass.
Still, in a signal of the seriousness with which the situation is being viewed, the Prime Minister’s Office intervened in the matter last week. The Prime Minister’s principal secretary Pulok Chatterji, foreign secretary Sujatha Singh,aviation secretary K.N. Srivastava and other top civil servants held a review meeting to sort out the issue.
The threat of a downgrade of India’s air safety rankings is imminent, Mint first reported on 15 November, citing a government official who didn’t want to be named.
While a downgrade does not reflect on the safety of India’s airlines—the rankings measure the ability of the Indian regulator to follow safety processes and not that of the airlines—India risks being perceived in a negative light. It could also hurt business sentiment.
India is expected to be the third-largest aviation market by 2020, handling 336 million domestic and 85 million international passengers with projected investment to the tune of $120 billion by 2020, aviation minister Singh said at the Washington summit.
The problem lies in the current government trying to do a cosmetic job on DGCA deficiencies so that the status quo can remain until a new government takes office after general elections due by May next year, a person with knowledge of the matter said. He isn’t one of the two officials cited above.
“They have been told by FAA through diplomatic channels that this time they will not be able to hold back,” this person said, also on condition of anonymity.
The FAA downgraded the safety ranking of strong US allies like Mexico in 2010 and Israel in 2008.
The PMO meeting discussed steps to convince the FAA audit team when it arrives in the second week of December that India is serious about making changes, said the official cited in the first instance.
Among the many steps taken, said the first government official, was a decision to allow the DGCA to hire commanders (senior pilots) for airlines safety audits directly and pay them market salaries, which can be nearly as much as Rs.10 lakh per month.
DGCA has been so far bound to pay government-mandated salaries, which are way below industry average. The regulator has, therefore, been forced to take on flight operations inspectors from Air India and private airlines. And in contravention of its own rules, these inspectors also serve in management positions in their airlines.
Since the inspectors are those who audit airlines, they cannot be expected to be objective, analysts say. This conflict of interest is another major issue flagged by FAA, Mint reported on 15 November.
Another key flaw the FAA has pointed out in its report is that India does not have a trained examiner for the Boeing 787 Dreamliners, said the second government official.
India is likely to tell the US that there are no trained examiners for Dreamliners outside the US since it is a new aircraft. India will demand that Boeing station such examiners in India immediately.
“If not, they can keep the rest of the Dreamliners in Seattle (Boeing headquarters) itself. We don’t need any of them,” the second government official said. “If we can’t fly to US, then American airlines will also not be able to expand into India.”
Jet Airways’ former chief executive Steve Forte, who is based in New York, said both sides need to cool down the situation. “A win-win amicable solution would be much more desirable. How to achieve it? DGCA should show the willingness to work together with the FAA to resolve all issues and to accept their recommendations as long as they are factual and have a purpose,” he said. “It is important for the DGCA to negotiate a reasonable timetable to get the work done after this next audit and before the following. DGCA and FAA should cooperate together to publish a timeline with specific goals and dates to be met.”
India has cleared a proposal for the formation of a new, more autonomous regulator, the Civil Aviation Authority. The decision has since been sent to a parliamentary committee for further review.
“The FAA has to understand the difficulties in the dealings and struggles within the Indian government that may be hampering the work of the DGCA (such as lack of a sufficient workforce), but in the final analysis the FAA cannot afford to be lax on rules that concern the safety of passengers, crews and aircraft,” Forte said. “Their assessment (and the DGCA’s) has to do with lives and equipment, and not politics.”