India's private operators appear to spend more of their time defending themselves against litigation, pursuing their own legal claims, or running into trouble with the regulators, than they do flying.
The latest player to join the now familiar scene of foreign lessors resorting to court action over unpaid rental fees is NEPC, which has denied it owes any of the plaintiffs money. US lessor PLM has issued a writ for US$1.4 million in fees it claims are outstanding on two B737-200s. PLM took the action while the DGCA considered its request to ground and de-register the aircraft. Two further US lessors are claiming compensation totalling US$3.2 million for unpaid bills on spares and engines. NEPC chairman Ravi Prakash Khemka denies all the claims: 'We do not have any dues pending.' But one of NEPC's directors, Turupati Kumar Khemka, admits the carrier is facing a 'temporary' cash crunch.
NEPC has also run into trouble with the Securities and Exchange Board of India. Sebi has launched an investigation over alleged default of payments to shareholders of private operator Damania, which Khemka took over in 1994. Sebi has already rejected NEPC's bid to take over ModiLuft, because of an escape clause in the offer which gave the carrier the option to withdraw if it managed to secure less than 47.32 per cent of the equity. Sebi says takeover legislation does not permit a conditional offer, but the carrier has approached the finance ministry in a bid to get the ruling overturned.
Meanwhile, ModiLuft's chairman, Satish Kumar Modi, has reacted to Lufthansa's decision to cut all links with his struggling carrier by threatening a US$100 million lawsuit for, among other things, breach of contract. Lufthansa is now taking steps to retrieve its two remaining B737-200s from the carrier, which currently only has four aircraft operational. The general consensus is that Modi will have bitten off more than he can chew should he carry through his threat of legal action. The German major has certainly lost all patience with its erstwhile protege, accusing ModiLuft of trying to 'create a smokescreen that conceals its persistent and admitted financial default.'
If the future looks bleak for ModiLuft, the situation at East West Airlines, once the country's largest private operator, looks even grimmer. The Mumbai-based independent had its ninth and final aircraft grounded in early July for failure to pay outstanding airport and ATC charges to the Airports Authority of India.
The only sizeable private operator that appears unaffected by the industry-wide malaise is Jet Airways. The carrier, which claims to have made a profit on turnover of US$130 million in the year to 31 March 1996, is now operating 11 B737-400s and aims to lease four more from Malaysia Airlines by the end of the year. The carrier is also planning to establish turboprop operations to feed hubs in Delhi and Bangalore and is evaluating aircraft types. The operation of turboprops on thinner routes would finally bring Jet within the government guidelines, which require private operators to serve a minimum number of lower yield routes.
Meanwhile, the new Indian government has dashed Singapore Airlines' hopes of reactivating its proposed joint venture airline with the Tata group. 'A big no is the answer to the proposal,' says civil aviation minister C M Ibrahim.
R Prasad/M Odell
Source: Airline Business
