Home / Companies / People /  Fight between Ratan Tata, airlines escalates

New Delhi: The war over rights to fly abroad took an ugly turn on Wednesday with established airlines questioning Tata Sons’ motive in asking for liberal flying rights and the latter retorting that it was the pioneer of aviation in India and follows all regulatory requirements.

The Federation of Indian Airlines (FIA)—which represents IndiGo, Jet Airways India Ltd, SpiceJet Ltd and GoAir—on Wednesday alleged that a previous statement by Tata Group chairman-emeritus Ratan Tata demanding open skies was actually in self-interest.

FIA said it is “deeply disturbed" by Tata’s statement, “claiming to be in national interest but effectively in self-interest". It said Tata is a 51% shareholder in Vistara and the main Indian shareholder in AirAsia India. “The policy that is now being advocated serves only the parochial limited interest of two international airlines and their Indian partner," it claimed.

At the core of the issue is the so-called 5/20 rule, which bars airlines from lucrative overseas services until they secure 20 aircraft and notch up five years of flying in India. The rule bars Vistara and AirAsia from overseas flights, and an FIA visit to the Prime Minister’s Office (PMO) last week demanding that the rule be retained had prompted Tata to speak out against it.

FIA said in its statement that Vistara was actually controlled by Singapore Airlines, Tata’s partner in Vistara.

Airlines such as Vistara and Air Asia are effectively run by the foreign partners, “as is evident from the statement made by the chief executive of AirAsia who has resigned on the grounds of interference from Tony Fernandes and Malaysia. This has been further endorsed by its shareholder Mr. Bhatia," FIA said.

In an interview to The Economic Times on 11 December, AirAsia’s Arun Bhatia had said the airline was controlled from Malaysia. Chandilya, the airline’s India chief, had no control over it and decisions were taken by its founder, Tony Fernandes, he said.

Tata Sons was quick to respond.

“The 5/20 rule has thus far principally benefited only foreign airlines, who have captured 70% of the international traffic with India, taking Indian jobs and revenue with them," it said, adding that the claim of existing airlines that fares in India will go up as a result of removing the 5/20 rule is specious and unfounded. “Not protectionism, but increased competition within the country will further contribute to lower prices and greater accessibility of air travel to common people."

Tata Sons said there are no global parallels to this rule and it is discriminatory to Indian airlines as foreign airlines that do not meet these criteria are allowed to operate in Indian skies, but Indian airlines cannot enjoy reciprocal rights.

Nearly 70% of the international traffic is carried by foreign airlines. Except Jet Airways, all other airlines of FIA such as IndiGo, SpiceJet and GoAir either do not have international operations or makes about 10% of their total operations.

FIA said it has already sent its views to the civil aviation ministry, the minister of state in the PMO and other senior cabinet ministers.

According to FIA, to secure an airline permit in Singapore, “if the applicant is not a citizen of Singapore, or substantially owned and effectively controlled by the government or citizens of Singapore or both, their applications will be refused".

FIA claimed that if rules and laws were reciprocal, an Indian airline will not be permitted to establish itself in Singapore or Malaysia on the same terms as has been permitted to Vistara and Air Asia in India.

Tata Sons defended both its joint ventures, saying they were fully compliant with the requirements of Indian regulation. Majority ownership and effective control of both airlines are with the Indian parties, as per the requirements laid down by the government.

Further, all important decisions on the day-to-day operations of the airlines are taken by the management teams of these airlines under the overall supervision, control and direction of the respective boards of directors (which include a majority of Indian nationals). These boards are chaired by long-time Tata veterans: S. Ramadorai at AirAsia India and Bhaskar Bhat at Vistara.

Tata also invoked Air India in its statement.

“The Tata group pioneered civil aviation in this country with the establishment of Tata Airlines in 1932, and built it into one of the finest airlines of the world. The Tata group is absolutely committed to helping to realize the vision of all forward–looking stakeholders to enhance air connectivity within India, and to bring India and the world closer to one another," it said.

Consulting firm Capa’s South Asia chief executive officer (CEO) Kapil Kaul said the older airlines were clutching at the straws. “I am surprised with the intensity and aggressive lobbying by FIA to hold on to 5/20. There is no merit in their argument. I don’t see airfares going up once 5/20 rule is abolished," said Kaul. “I see 5/20 rule being abolished, may have some soft riders, and FIA sees this happening and, hence, this last minute push to restate their case."

New York-based former Jet Airways CEO Steve Forte said both the sides are trying to present their arguments.

“Both Mr. Tata and FIA have good points," Forte said. “However, the argument of FIA accusing Tata of self interest is quite phony. Isn’t FIA serving its own self interests by opposing changes? Of course, they are. This is why the government should adequately change the rules on the 5/20 and of route dispersion to modernize the system to a more elastic and international standards."

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