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Phee Teik Yeoh says India’s faster economic growth is enabling it to become the second largest emerging market after China, thereby improving the overall business sentiment. Photo: Ramesh Pathania/Mint
Phee Teik Yeoh says India’s faster economic growth is enabling it to become the second largest emerging market after China, thereby improving the overall business sentiment. Photo: Ramesh Pathania/Mint

Phee Teik Yeoh|Abolishing 5/20 rule will send the right signal to investors

Chief executive officer of TATA SIA Airlines Ltd, which owns Vistara, says he is now seeing strong air traffic growth coming from non-metro cities

In January, Vistara, an airline joint venture of Tata Sons Ltd and Singapore Airlines Ltd, took to the skies.

Phee Teik Yeoh, chief executive officer of TATA SIA Airlines Ltd, which owns Vistara, says he is now seeing strong air traffic growth coming from non-metro cities too. Edited excerpts from an interview:

How is the recovering economy helping the newly launched Vistara?

India’s faster economic growth is enabling it to become the second largest emerging market after China, thereby improving the overall business sentiment.

A recovering economy also means growth in trade and tourism, and a resultant improvement in business travel. Domestic traffic in India has grown 20% in January-September which is a very encouraging sign for the sector and the envy of many countries.

This is reflected in Vistara’s steadily increasing load, as many travellers come to India to experience the best the country has to offer.

Another trend that is a result of the growing economy is that travel is growing beyond the metros, as there is heightened economic activity that is taking place in other parts of the country. Take for example tier II cities like Hyderabad, Pune, Lucknow, Bhubaneswar and Goa (Panjim), where Vistara is witnessing a steady growth in demand.

These changes are going to transform the industry and offer immense potential to all players to grow.

Do you see a change in investment climate and ease of doing business in the country under the new government?

The government of India is rapidly creating conditions for growth by directly supporting manufacturing, facilitating infrastructure creation, and by focusing on investment. For example, FDI (foreign direct investment) limits in defence and insurance have already been raised. Infrastructure projects have been taken up—railways is one area of major investment. A mass banking initiative has been taken up which will bring in domestic investment.

Four other critical priorities have been enunciated by the government, which speak about its determination to realize its vision. The first is that there is unequivocal acceptance now that businesses must find it easy to operate in India, and that decision-making must be transparent and predictable.

Over the last 10 months, policies and decisions, whether in taxation, resource allocation or business transactions, have been aimed at offering clarity and predictability.

The second big shift is the manner in which the central government is enthusiastically empowering the states of India, with unprecedented resource transfers and greater autonomy to chart their course.

The third priority that we have seen is the focus on a country-wide skill development programme. The administration has brought together government entities, private bodies and the non-profit sector to collaborate on this initiative.

The fourth big change we are witnessing in India is the enthusiastic adoption of state-of-the-art technology. Whether it is the prime minister’s plan for a Digital India connecting the remotest parts of the country, or the massive programme to boost use of solar energy, or the deployment of green technology in manufacturing, Indian industry, cutting across sectors, is being encouraged to technologically leapfrog ahead.

What more can be done to propel investments?

Three things need to be done to propel investments in India–make it easier to do business, lower the cost of doing business, and create a liberal market-friendly regime.

In civil aviation, for instance, while a new draft policy has just been unveiled, the government can do several more things to transform the sector into a socio-economic growth engine for the country.

Ease of doing business can be enhanced by simplifying RDG (route dispersal guidelines) and leaving commercial matters, like airfares and choice of destinations to fly to, to the airlines.

Cost of doing business can be pruned by rationalizing excessive taxes on ATF and lowering the high cost of airports. Abolishing the 5/20 rule, which is restrictive to Indian carriers, will signal a liberal, market-friendly regime to Indian and global investors.

A new draft aviation policy has been announced. What are the key things that you think are realistically achievable in the final policy and why?

The Draft Civil Aviation Policy is a fairly comprehensive approach that will help unleash the potential of the aviation sector in India. The policy has outlined a broad direction, and now it depends on the outcome of the public discourse.

Consolidating the aviation ecosystem and providing a level playing field to all stakeholders in the sector will enhance ease of doing business and more collaboration and it is easily achievable.

How many airlines can India hold?

If the new aviation policy unshackles the sector from the archaic rules, which we are optimistic it will, we can look forward to more regional and international airlines to meet the growing capacity demand.

What more can the airlines and government do to speed up air traffic growth?

With an anticipated three-fold increase in domestic air traffic, the Indian aviation sector has the potential to contribute to over 5% of the GDP and create economic value of up to $250 billion on an annual basis by 2025. By 2050, it could generate direct employment for more than 2.3 million people.

Simplified processes and allowing the market forces to prevail will go a long way in achieving this vision. There is an urgent need to lower the cost of doing business which we believe that the government is working towards. We are optimistic this will change the environment, making it conducive and bring in positive business sentiment.

Cheaper oil prices have come as a big help for the airlines, especially in India. What are the trends you expect in oil going forward?

Though a fall in ATF (aviation turbine fuel) prices globally has lowered the financial burden on the entire industry, the price stability cannot be predicted, and hence it’s tough to evaluate how much of this would affect airlines’ operational costs as there are a multitude of factors impacting that.

The general view in the industry is that in the next one to two years, the downward trend will continue. However, we cannot take this for granted and will keep a tight vigil on our operating cost.

How do you see your network in five years if you are allowed to fly international routes before completing five years as per the mandatory clause, which is under review?

Indian carriers are under-utilizing their flying rights for overseas destinations, which is not good for the economy as well as the sector.

Once we are allowed to fly international, the expansion of our route network will depend on certain specific and dynamic factors, such as availability of resources, market demand and economic viability.

Once the restriction is lifted, we would be re-strategizing and the world will be our oyster.

IndiGo is almost about to end its IPO process and has gone public to say it won’t oppose international rules being relaxed. Has the changed view been communicated to you and have you seen this in action also?

The reaction to the draft aviation policy has been a collective coherent response that we have seen from all aviation players.

Everyone has applauded the initiative of the government in putting together a comprehensive draft. All airlines have recommended a level playing field and a liberal regime that allows the market forces to prevail.

What more can a Vistara passenger expect in the days ahead?

We will further evolve and strengthen our value proposition to suit the customers’ demand.

The current fleet of eight aircraft will grow to nine by the end of this year, and concurrently, there will be increased frequencies to existing network. Special privileges to our Club Vistara members will be announced through our strategic partnerships with airline and non-airline brands to further popularize our offerings.

By early next year, the entire fleet of Vistara will incorporate the most advanced in-flight entertainment system of wireless streaming of highly engaging content across all cabins.

We are also looking forward to the launch of Vistara’s very own signature lounge at T3 (terminal) in Delhi.

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