Tuesday, August 15, 2017

A steady flight despite frequent turbulence

Bengaluru: The wheel has almost turned a full circle.

In 1947, Tata Airlines, launched by JRD Tata, changed its name to Air India and soon after launched its international operations.

Seventy years later, the Tatas are learnt to be keen on picking up a stake in Air India, which is set to be privatised soon.

The nation’s civil aviation industry has witnessed several policy changes over the past seven decades — from privatisation to nationalisation and again to privatisation.

According to Wolfgang Will, Senior Director, South Asia, Lufthansa Group, the new civil aviation policy is one of the most competitive in the world and will be replicated by other countries. “I tell my peers and the others, ‘look at what is happening in India. Sooner or later, it will happen in other markets too.’ There is a lot to learn and it is rewarding too,” Will told BusinessLine in an interview.

The new civil aviation policy, called the National Civil Aviation Policy, unveiled in 2016, caps air fare at ₹2,500 per passenger for one-hour flights. It also plans to revive airstrips/airports as no-frill airports with an investment of ₹50-100 crore. There were several other incentives thrown in, like concessions to various stakeholders including airlines. The policy also allows 100 per cent FDI in the sector and automatic approval of foreign ownership up to 49 per cent.

The Tatas started international operations in 1947 with a capital of ₹2 crore and a fleet of three Lockheed aircraft. The first ever international flight by the airline was between Mumbai and London via Cairo and Geneva. If the Tatas were to buy Air India today, they will have access to 140 aircraft, several hangars and huge real estate, and 41 international and 72 domestic destinations. The airline also has a domestic and international market share of 14 per cent and 17 per cent respectively.

But along with it comes a whopping debt of nearly ₹49,000 crore even though the government has come out with a ₹30,000-crore bailout package. It goes to show that nationalisation of private airlines in 1953 has turned out to be its biggest failure as well.

When Air India was privatised in 1953, eight independent domestic carriers were merged. The airline itself was split into two: Air India for international routes and Indian Airlines for domestic ones.
14/08/17 Business Line