Post-retirement, Ratan Tata is helping group take wing again

Live Mint :Tarunshukla:P R Sanjai :4 March 2013

Ratan Tata, who stepped down as Tata Sons chairman in December, 
has been playing a major role in AirAsia India

New Delhi/Mumbai: Launching an airline is unlikely to be anyone’s description of a post-retirement assignment, but that is exactly whatRatan Tata, chairman emeritus of Tata Sons Ltd, is up to.

On Friday, he met India’s civil aviation minister Ajit Singh in New Delhi to discuss, among other subjects, the Tata Sons-AirAsia Bhd plan to launch an airline in India.

“He has had the desire to get into it and everyone knows it. He was chairman of Air India for a short time and then he had tied up with Singapore Airlines,” said Singh, adding it was a courtesy call. “His heart is in the airline. We discussed many things and that was one of them.”

A Tata group spokesperson confirmed the meeting was a courtesy call.

Despite Tata Sons’ claim that it will not be involved in the operational aspects of running the proposed airline—entirely plausible, given AirAsia’s expertise in this area—there is a sense of closure in the diversified conglomerate’s re-entry into aviation.

Air India was founded in 1932 by the Tata group, and for decades, it was considered one of the world’s finest airlines.

Indeed, a poster in the civil aviation minister’s office quotes the airline’s founder J.R.D. Tata: “I beseech you that when I am no more, and those of you who will still be there, always remember, the airline must never, never be allowed to be anything but the best. In doing so we will not only ensure our own development, growth and progress but prosperity of our own people.”

Air India was nationalized in 1953.

In the 1990s, the Tata group tried to re-enter the business by launching an airline in partnership withSingapore Airlines, but the government of the day nixed the plan, some say under pressure from state-owned Air India and private sector rivals.

On 20 February, Tata Sons and AirAsia surprised everyone by announcing their joint venture, low-cost airline AirAsia India, in which the Malaysian low-cost operator would own 49% and the Indian conglomerate 30%. Arun Bhatia of Telestra Tradeplace Pvt. Ltd, a Delhi businessman who is related toL.N. Mittal by marriage—his son Amit is married to Mittal’s daughter Vanisha—will own the rest.

Since the announcement, it has become clear that Tata, who stepped down as chairman of Tata Sons, the group’s holding firm, on 28 December, has been playing a significant role in AirAsia India.

Aviation redux

Tata, now 75, has always been interested in aviation and is a trained pilot, but, in two separate interviews including one on the group’s website last year, he had expressed his passion for flying and his concerns about getting into the business.

“Flying, I continue to be involved with. I love flying and I hope to keep doing it so long as I can pass my medicals and stay proficient,” he had said then.

In another interview, he went on to speak about the “destructive competition” in India’s aviation sector, according to PTI. Recalling the proposed venture with Singapore Airlines, he said, “It is a different sector today than it was at that time. It is somewhat like telecom. It is proliferated by many operators, some of them in financial trouble. I would hesitate to go into the sector today in the sense that the chances are that you would have a great deal of competition, which would be unhealthy competition.”

Still, a passion for aviation, as well as a clear opportunity might have encouraged the group to re-enter aviation, said Shakti Lumba, an independent aviation consultant, formerly with Air India.

“The best in today’s scenario is the most-efficient, most-
affordable and provides maximum connectivity to tier II and tier III towns. Anyone who can provide that is the best airline as far as the Indian public is concerned,” Lumba said, referring to the growing demand for air connectivity to smaller cities and towns that are rapidly urbanizing.

That could also explain why Tata Sons chose to partner with AirAsia, which has made a name for itself in the low-fare end of the business.

What could have brought AirAsia and the Tatas together is the need for each other, said T.V. Mohandas Pai, chairman of Manipal Global Education and former head of human resources at Infosys Ltd.

“I think his (Ratan Tata’s) association will be very important to manage the government angle. His thoughts, his strategic insights, his passion for aviation and India will be critical,” he said. Neither Ratan Tata nor Tata Sons will need to be involved in “management because AirAsia knows the business inside out”, Pai added.

Still, there are some who are surprised that Tata did not seek to re-enter the business with Singapore Airlines.

Mumbai-based Rohinton Bhappu, a retired Singapore Airlines and Air India commander, said Tata was keen to partner with Singapore Airlines to start an airline (in the 1990s) because “he believed in the efficiency of the Singapore system beyond Singapore Airlines”.

Bhappu said he was surprised at Tata getting back into aviation without Singapore Airlines.

That may well have to do with Tata’s relationship with Tony Fernandes, founder and chairman of AirAsia.

The Tony link

Fernandes, a music industry veteran of Indian descent who has made a huge success of his airline, said in a 20 February interview that he first met Tata in 2005 when the Tata group sponsored Formula 1 (F1) driver Narain Karthikeyan. Fernandes is the founder of the Caterham F1 team.

In September 2012, India liberalized rules in the airline business and allowed overseas airlines to own up to 49% in Indian ones or in joint ventures.

“When the Indian government started liberalizing, I talked to him straightaway. 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,” Fernandes said in the interview.

Tata may have stepped down from the boards of all the Tata companies, but Fernandes wants Tata to be on the board of the airline.

“I have asked him to be an A320 pilot, that will save cost. I can charge flyers a bit more, too,” he joked during a conference call after the joint venture with Tata Sons was announced.

Meanwhile, AirAsia India has already started approaching top aviation executives in India, as it attempts to build its team ahead of a nod from the country’s government, according to two people familiar with the matter who asked not to be identified.

The fate of AirAsia’s proposal will be decided by the government on Wednesday, but the partners have already scheduled interviews with potential hires this week, indicating their confidence of receiving clearance.

“They have started approaching people and seeking interest,” said a top executive with an Indian airline who was approached by AirAsia India. He spoke on condition of anonymity.

A second executive, at a different airline, said he too had been approached by the company and that AirAsia India seems to be “very actively” pursuing candidates. He too asked not to be identified.

This person added that a team from AirAsia from Kuala Lumpur will be in India later this week to participate in interviews with shortlisted candidates.

An AirAsia spokesman declined to comment on the matter.

A third person familiar with the matter said AirAsia India may look at a chief executive from AirAsia, probably a Malaysian Indian. This person also didn’t want to be named.

Once the government gives its approval for the venture, AirAsia India will need to seek permission from the civil aviation ministry for an airline licence, at which time it will have to show that it has the management bandwidth to run the airline. The heads of safety, operations, engineering, commercial and finance will be the key positions the airline will be looking to fill.

Pai said AirAsia India should hire “people who believe in frugal management—not the usual Tata management style —aggressive and more passionate”.

AirAsia India may find the going easier when it comes to filling middle and junior positions, said a foreign airline executive who tracks India closely, but asked not to be named, referring to hundreds of Kingfisher Airlines Ltd employees looking for a job.

“They will have trained people available to them at a relatively low rate, including engineers, pilots, etc., and all of them familiar with Airbus A320s. This was not always the case,” this person said.

The financially troubled Kingfisher Airlines has been grounded since October, initially because of labour unrest and later on account of regulatory issues.

AirAsia India plans to start operations by the end of this year with three-four aircraft and an initial investment of about $30 million (around Rs.165 crore today). It will operate from Chennai and focus on providing domestic connectivity to tier II and tier III cities, the Malaysian airline said in a statement last week.

It won’t be easy, said Lumba, pointing to the nature of competition in India. AirAsia India will fail if it doesn’t maintain its philosophy of being an “ultra low-cost airline”, he added.

Tata’s involvement, though, has made others more sentimental about the proposed airline.

Bhappu said he hoped the third time would prove lucky for the Tata group and Ratan Tata.