Finally airborne

Tatas' return to civil aviation means more competition

The Tata group will reportedly soon enter civil aviation after a break of 60 years, though as a junior partner to AirAsia. Ratan Tata, the former chairman of Tata Sons, had wanted to set up a domestic airline, in association with Singapore Airlines, way back in 1995 but his efforts were stymied. The rules were changed in such a way that foreign airlines were barred from investing in Indian carriers. Since Tata Sons couldn’t have run an airline on its own, this killed all plans it had for the sector. Last September, the government finally allowed foreign airlines to own up to 49 per cent in Indian carriers. That has given Tata Sons the opportunity to get into a business it has eyed for a long time, though after a delay of 18 long years.

What has anybody gained by the delay? The story of civil aviation so far has been one of pain. The list of airlines that have gone belly-up is long: East West, Damania and, of course, Kingfisher. Air Deccan got sold to Kingfisher after recurring losses had made its operations unsustainable. The industry has been mired in losses. Investors and banks have had to book some of those. Employees have faced grave uncertainties. Fliers have had to put up with shoddy service. That’s because none of those who started airlines had any knowledge of the business. Everybody learnt by trial and error, and paid the price for it. The entry of foreign airlines would have brought some domain expertise from which everybody in the sector would have gained. This narrative would have been different had the government not blocked the entry of Tata Sons and Singapore Airlines 18 years ago. It is possible that rivals lobbied hard to keep the Tata group out. And finally when the sector was opened up, it was only to bail out cash-strapped airlines like Kingfisher. A worse example of crony capitalism, and the havoc it can play, will be hard to find.

That’s not all. Civil Aviation Minister Ajit Singh has said that he would have been happier if Tata Sons had floated its own airline, given its ample resources. He later clarified that so long as the partners in the venture met all the policy guidelines and regulatory requirements, they were welcome. Whether Tata Sons chooses to enter a business on its own or with a partner is a decision the company has to take, not the civil aviation ministry. AirAsia is the largest budget carrier in Southeast Asia by fleet size. When the whole market in India has gone low cost, its operational expertise could be vital to the success of the venture. The sector is strengthened by foreign know-how -- it is unfortunate, seen that way, that the proposed Jet-Etihad deal is not working out smoothly. On a similar note, the minister should not worry about inadequate plane load factor and predatory pricing. If there are unfair tariff-related practices, it is for the Competition Commission to look into. The civil aviation market has achieved some maturity and inefficient airlines have been shown the door. Let the market now take its course.