How AirAsia struck a deal with the Tatas

New Delhi: In early 2011, AirAsia’s Tony Fernandes was waiting to meet officials in the civil aviation ministry in New Delhi for talks on starting flights to India from Kuala Lumpur. On the wall of the room he was waiting in was a poster of J.R.D. Tata, founder of Air India. He says he sent a text to Tata group chief Ratan Tata: “This is a sign, let’s do it.” Fernandes had met J.R.D. Tata’s successor as Tata group chief at a Formula 1 race in 2005.

add_main_imageFernandes recalled, in a phone interview from London, the events that led up to Wednesday’s announcement about the joint venture plan with the Tata group and Telestra Tradeplace Pvt. Ltd. Edited excerpts:

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What was Ratan Tata’s reply to the text message?

He was very keen about it. He knew AirAsia, he saw what we had done in the market. He obviously had a passion for aviation and all the stars aligned at the right time.

Both partners have a sporting background also. I met Mr Tata through the Formula 1 business. When Tata was a sponsor, Narain and I made contact with Mr Tata (Tata group sponsored race driver Narain Karthikeyan for F1 in 2005). When the Indian government started liberalizing, I talked to him straight away. I said, look it’s time we look at this and I can’t think of anyone else I would like to do this with. That was six months back.

In the last six months since the government opened up foreign direct investment (in India’s airlines by overseas carriers), you made several trips to India and tweeted about your excitement regarding the Indian market. How did those trips go?

All the times I have come to India, I was kind of teasing a bit because at all times you were in discussion on this. And the driver (he hired in India) made the biggest impact on me.

This man took 40 hours to get from Madras to Delhi in a train and we were talking about fares (as he drove him around for meetings in Delhi) and how much he would pay to fly and that gave me the confidence to change many people’s lives in India and really create a product which could really be low-cost and make an impact.sixthMAds

Did you meet Ratan Tata at Bombay House?

I have met him in various places and yes Bombay House is one of them.

But yes, when I finally presented it to the Tata Sons board, it was in Bombay House. It was about two months ago.

There’s some speculation that since L.N. Mittal’s family is connected to the Bhatias of Telestra, the deal was sealed when you were at the World Economic Forum meetings in Davos.

No. It was sealed before. It was a pure sporting deal. Its QPR (Queens Park Rangers, the UK football club that Fernandes owns) on one side Caterham (British sportscar maker and F1 team owned by Fernandes) on the other side. Both were the links to my partners in India. (Arun Bhatia’s son Amit Bhatia is the son-in-law of ArcelorMittal’s L.N. Mittal and serves on the board of directors at QPR club alongside Fernandes.)

And you are not buying Kingfisher?

No. My whole life has been about organic growth. Never say never, but we have generally grown organically because of cultural reasons etc. So, Kingfisher definitely not, I mean (it’s) too far down the wire, I think.

How has the reaction to the announcement been?

We have got an amazing response. The Indians are very excited about it. It’s something I am very proud of, it’s something that’s been long in the making. Obviously, I am of Indian origin so it makes it that much more special. My father, Stephen Fernandes, was an Indian from Goa and mother Ena Fernandes was a Malaysian from south India. I think we couldn’t have found better partners, which is the most exciting thing of this venture. To partner with the Tatas and to partner with the Bhatia family is something very special, I think. We have studied this market for a long, long time so this is not something we have jumped into and I feel we can produce a product at the right cost structure which will then give the right fare to really stimulate the Indian market and create some real economic growth in the Indian market.

When is AirAsia India likely to start services?

I think it depends on all the approvals but I hope sometime this year.

What’s the vision that you and the Tata group have for the airline two years down the line?

I am never good at that. If you would ask me a few years ago, when I started AirAsia, we had all these planes, we just ploughed on. But vision? Take India, one step at a time. It’s important. India is too big a country to try and do everything. We will take India one step at a time. We will do region by region. Our main vision is a lot of new routes, a lot of connectivity that’s not been done before.

That’s only flights within India?

Yes only within India. We are not allowed (to fly on international routes) until the laws are changed, so we will be only focused on domestic. (Indian rules require an airline to complete five years of domestic operations before starting overseas flights.)

Will AirAsia India have only Airbus A320s or ATRs also?

No ATRs. Only A320.

So it will be a pure-play, low-fare airline?

Yes, it would be.