Say Tata again before you fly
It isn’t the best time for aviation, but the Tatas’ venture with AirAsia gives cause for optimism.india Updated: Mar 07, 2013 21:49 IST
Policy is on the right course when it gets the Tatas interested in Indian aviation again. JRD Tata started Tata Airlines to deliver government mail in 1932. His hugely successful airline was among the first businesses taken over by the government of a newly independent nation. An Air India on continuous life support is a study in contrast to JRD’s maharaja — the stuff of corporate folklore. Over the past two decades the Indian skies have been opened to private airlines but JRD’s successor Ratan Tata stayed away as regulations and taxes made flying a perilous occupation in India. Of the two generations of private airlines that took wing, only a handful are still flying, the latest and most spectacular addition to the scrap heap being liquor baron Vijay Mallya’s Kingfisher Airlines. By the time the government came around to working on a key industry demand — access to capital — time had run out for Mr Mallya. Now eager to draw foreign investment into a beleaguered industry, the government has not allowed technicalities to come in the way of a clearance for AirAsia, a Malaysian low-cost carrier, to set up an airline with the Tata group. The FDI policy announced last September allows foreign airlines to buy stakes in local ones; it was mum on start-ups till the Foreign Investment Promotion Board decided on the first proposal in aviation since the latest rules kicked in.
Then, as now, the Tatas are entering the industry gingerly. The group’s stake in the proposed airline is 30% and AirAsia’s presence in the country is restricted to a clutch of coastal airports to ferry budget-conscious Indians to holiday destinations in southeast Asia. The new carrier’s India plans are yet to emerge but they will most likely be a play on flying cheap. Naresh Goyal’s Jet Airways, Kingfisher and Air India had among them cooked up a glut of full-service airline seats and something had to give. In the event, it was Kingfisher which promised a rich flying experience. On the other hand, new kids on the block like Indigo have steered themselves out of turbulence by being frugal from the onset.
This is certainly not the best time to launch another airline in India. The economy is at the bottom of a business cycle and aviation does not weather slowdowns easily. Indian airlines have racked up a sinister amount of global aviation losses. Some of the policies that contributed to this — high taxes on jet fuel, restrictions on flying abroad’ — are still at play. Yet there is more than symbolism for the industry if Tata wants to ferry people again.