Tata Group, Singapore Airlines entry good news for passengers

Updated: Sep 26 2013, 17:33pm hrs
The announcement of the proposed Tata-Singapore Airlines venture was a big surprise and is great newsfirst for the passengers, second for the aviation community, and then, for the country.

Passengers first, because competition will bring down sky-high fares by breaking the kind of cosy cartel that seems to exist, and simultaneously improve quality of service and product offerings. It is good news for the gloomy aviation sector. It will create more direct and indirect employment where thousands of trained pilots, aviation engineers and technicians are languishing without jobs and this will give a fillip to the ancillary industries like maintenance, repair & overhaul (MRO), ground handling, catering, etc, across the country. Finally, it is going to give a boost to the economy. When new airlines get launched, frequencies improve, new city-pairs are discovered and connected, and cities and towns in remote areas are brought into the aviation network. This will give an impetus to tourism and also push investments to the backward areas in the hinterland. And it is also fitting that, viewed against a historic backdrop, Tatas are back in aviationwho can forget that JRD Tata, a great aviator, pioneered civil aviation in this country and founded Air India.

But the announcement, while it cheered the public but may not have gladdened the competitors, has brought to the fore a few important issues that must be debated and addressed.

Tata-SIA first attempted a foray into aviation 15 years ago. The government, or the party at the helm of affairs, then had torpedoed the proposal. Given that it was a Tata-backed venture, it was sacrilege. Ratan Tata went on record that he was asked to bribe someone in the civil aviation ministry to get a licence even though the Foreign Investment Promotion Board (FIPB) had cleared it. While the government and politicians of the day bore the ignominy of preventing the very company that pioneered aviation in India to form a new venture, what is tragic and ironic and glossed over is that a private airline, which today is running helter-skelter to stitch together its own FDI with a Middle East carrier, lobbied hard and used all means to block the Tata-SIA venture, conveniently forgetting that it was itself an offspring of reforms which broke the monopoly of Indian Airlines and ushered in a new era in Indian aviation.

Now, this raises serious questions. Why do we still need a licence to start an airline The home ministry gives the security clearance for promoters and directors to start an airline so that terrorists and undesirable elements are prevented. And the civil aviation ministry has set down very clear and detailed policy guidelines and requirements that have to be met and approved by the Directorate General of Civil Aviation (DGCA) which issues the operators the permit to start an airline after security clearance and due diligence. So, why run to the civil aviation ministry for a clearance, which is essentially a licence raj as it is arbitrary and discretionary which will open doors to a quid pro quowhen the same ministry has already issued guidelines on who can start an airline and has specified what conditions have to met and adhered to.

Next, there is a lot of talk of possible conflicts of interest between Tata-SIA and AirAsias Indian venture, as Tatas have already signed a joint venture with the latter to start a low-cost airline. That cannot be a concern of the public or the government. That conflict is purely an internal and private matter between the shareholders of Tata, SIA and AirAsia.

But what is pertinent and should be a matter of concern for the government are two issues. First, the current laws and guidelines do not reckon with the monopoly, anti-trust and competition aspects of one airline or business group starting multiple airlines. Wont it lead to one business group having 10 JVs and starting 10 separate airlines and controlling the skies Is it desirable and in the interest of passengers Will this not lead to huge monopolies and conflict with the larger interests of the public

Second, the FDI norms for foreign airlines stipulate that the management, equity shareholding and board control directly and indirectly must vest with Indian nationals and companies. Looking at the statements of Tatas as well as the press conferences and press notes of the ebullient and maverick promoter of AirAsiahe is calling all the shots and controlling the airline, and the Tatas are just passive investors. So, both from a regulatory perspective and the likely minefields while navigating between two airlinesone controlled by Tony Fernandes and the other by Tatasmaybe it is prudent to be firmly in the saddle and build one great enduring airline for the country in the footsteps of JRD Tata who nurtured and built Air India brick by brick.

This has to be looked into and studied by the Competition Commission, ministry of civil aviation and FIPB, and suitable guidelines and policies be framed, which is in the aforementioned bodies domain. While we need broad-based privatisation, the regulations, either wilfully or unwittingly, should not enable and facilitate cartelisation or oligarchies.

But, in the mean time, let us toast to the new Tata-SIA venture as it augurs well for the country and also toast to the memory of a visionary aviation-legend of our times, JRD Tata, and say cheers. The new airline will be a wonderful gift as well as a tribute to JRD.

GR Gopinath

The author is the founder of erstwhile Air Deccan