Ad Here  
DMK does it again Welcome aboard President Kovind Welcome euphoria over the east Flying High? Rahul coronated Little for development Physician, cure thyself… State Elections: Mid-summer marathon Go for a One Power India Has PC missed out on BIG BANG REFORMS? Drive ahead, the road is well-laid... Open letter to citizens Cleansing a corrupt system… The Chinese model for rail development BJP - the unifying force (of opposition parties) ! BJP’s one man army... A challenge and an opportunity for OPS Fear of bankruptcy, liquidation ‘High speed’ diplomacy... AAP - change from street fighting to administration A WATERSHED YEAR 10-point programme Kanoon, Kovind and Kumble IE completes 47 years... Physician, cure thyself Fast - track railways to prosperity... Call for INNOVATION, for R&D Imperative to take states along… A 5-6 per cent growth is given… An unhealthy adversarial relationship Take the next leap forward... Entering the 50th year… The four DISRUPTIONS of the month Corruption institutionalised; technique perfected Where’s the big idea? LOT CAN BE DONE THROUGH THE PPP MODE... Trail-blazing Tamil Nadu Reserve and perish Welcome continuation of the reforms thrust Gujarat model for port development Light at the end of the tunnel – Cauvery Management Board to be set up Repeat 1991– work on a growth budget... Jaya Ho More lustre to leather: 70 years of CLRI Between the bang and the whimper… Scientists, please raise your voice for GM crops Need for more BHEL – R&D and image building require more attention BJP, shift to south Narendra Modi turns “THREE” Mr. PM, bite the bullet... TN budget - little leeway for capex Of judiciary and GM Rajini can’t or can?
Flying High?

The recent relaxation of restrictions on investment norms in the aviation sector has revived the interest of the Tatas in this business. Remember, Tatas pioneered civil aviation and operated Air-India before it was nationalised in the early 1950s? JRD Tata continued as chairman after the nationalisation. When the policy was liberalised in the early 1990s permitting competition, Tatas joined hands with Singapore Airlines and bade for re-entry. After a few years battling for permission, they gave up in despair. Remember, the 1990s had a procession of civil aviation ministers who had short tenures and most of them outright incompetent?

Even while large corporates were hesitant to enter the fray, small players with little experience or resources like NEPC Airlines rushed in. Of course, they crashed out in quick time.

The last decade witnessed the entry of budget airlines which helped a surge in first time air travellers. SpiceJet, GoAir and Deccan Airways expanded rapidly and offered tickets at affordable prices. This experiment coincided with the boom years of 2003-08 when economic growth zoomed. Praful Patel, as Minister of Civil Aviation in UPA I, also focused on the modernisation of airports. The bold initiative to invite private players to enter the fray resulted in Bengaluru, Hyderabad, Delhi and Mumbai airports emerging as modern airports with state-of-the-art facilities in double quick time.

The 2008 crisis slowed down the economy and civil aviation suffered as a consequence. The crash of Paramount Airways and Kingfisher and the large losses suffered by others afflicted the sector. Airfares shot up and air travellers were reluctant to fly.

The decision to permit FDI of 49 per cent by foreign airlines has revived interest in this space. Jet Airways utilised this by entering into collaboration with Etihad Airways of United Arab Emirates (UAE). Air Asia, a Malaysia-based budget airline, entered into a joint venture agreement with the Tatas and Telestra Tradeplace Pvt Ltd to set up a budget airline that will initially focus on the southern region.

The present proposal of Tatas involves a 49 per cent stake for SIA with Tatas holding the majority share. A Tata group veteran Prasad Menon, who retired after serving Tata Chemicals and Tata Power, is the chairman-nominee for the proposed joint venture (TCS’ s Ramadorai is the chairman for the budget airline).

After China, India is emerging strong in the market for civil aviation. The number of air passengers, presently in the region of 150 million, is expected to triple over the next seven years. SIA, with its large fleet, has earned a reputation for efficiency and growth. The large Indian domestic market will help this joint venture to tap a good share of in-bound and out-bound travellers apart from the huge domestic market.

Several other large airlines from Europe like Lufthansa evinced interest in such joint ventures but could not proceed ahead due to lack of stable and attractive long-term policies. With the present lacklustre growth of the European economy, one can expect the huge potential offered for growth by the Indian market attracting its large airlines as well.

Will the industry fly high or crash low? The jury is still out on this.

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236