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U.S. downgrades India aviation rating, hits Air India, Jet

January 31, 2014

By Devidutta Tripathy and David Evans

NEW DELHI (Reuters) – U.S. authorities have downgraded India’s aviation safety rating, citing a lack of safety oversight, meaning Indian carriers cannot increase flights to the United States and face extra checks for existing ones.

The Indian government said it expected to resolve by March all concerns raised by the U.S. Federal Aviation Administration (FAA), including appointing an adequate number of flight operation inspectors, and would approach the U.S. regulator for a review of its decision.

“The FAA has determined that India at this time is not in compliance with the international standards for aviation safety oversight,” the U.S. regulator told India in a communication, extracts of which were released by the Indian aviation ministry.

Jet Airways <JET.NS> and state-run Air India <AIN.UL>, the only two carriers that fly from India to the United States, would be impacted by the downgrade. Air India has 21 weekly flights between India and the United States, Jet has seven.

Jet Airways shares closed 3.7 percent lower after the news in a Mumbai market that ended 0.3 percent higher.

“It’s very disappointing and also surprising,” Indian Aviation Minister Ajit Singh told a news briefing on Friday after the FAA told Indian authorities that it was downgrading the country to Category 2 from Category 1.

“In our view, 95 percent of all the issues raised have been solved,” Singh said, adding they would address all of FAA’s concerns by March.

India joins countries such as Indonesia, the Philippines and Bangladesh who have a Category 2 rating. As on November 22, the FAA kept 81 of the 96 countries reviewed in Category 1.

Airlines from countries rated Category 2 can continue operations at current levels under “heightened FAA surveillance”, but cannot expand or change services to the United States, as per rules of the FAA’s International Aviation Safety Assessments (IASA) program.

State-run Air India currently does not have any plan to increase flights between India and the United States, Prabhat Kumar, head of India’s aviation regulatory body, told reporters.

Jet Airways, which last year sold a 24 percent stake to Abu Dhabi’s Etihad and is expanding its international flights, did not reply to an email seeking a comment.

Amber Dubey, head of aerospace and defense at consultancy KPMG’s Indian unit, said safety regulators in some other countries may follow suit after the FAA downgrade, which would then affect carriers like IndiGo and SpiceJet <SPJT.BO> who have flights to Asian and Middle Eastern countries.

“FAA’s downgrade typically has a domino effect,” Dubey said.

The FAA, which periodically reviews air safety preparedness of different countries, audited the Indian aviation regulator in September and December last year and had raised issues including lack of adequate number of flight inspection safety officers and training of officers who certify a plane is airworthy.

India had earlier this week approved appointing 75 officers in a bid to avert a downgrade and said it had addressed 29 of the 31 issues raised by the FAA’s safety audit.

(Reporting by Devidutta Tripathy, editing by David Evans)