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July 10, 1998


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FIPB meets today: Tatas may take off as solo airline

Amberish K Diwanji in New Delhi

The setting up of the Tata Airlines is likely to be announced one of these days, it has been reliably learnt.

The Foreign Investment Promotion Board is scheduled to meet tomorrow and might take a decision on permitting the Tatas to set up the airline, which has been hanging fire for the past four years.

According to sources, the Tatas have agreed to meet almost every condition stipulated by the government, leaving the latter with little choice but to grant clearance.

Apparently, the Tatas have now decided to set up the airline on their own. Foreign participation, if any, will be limited.

The Tata Airlines saga began in 1995, during the reign of the P V Narasimha Rao government. The Tatas submitted a proposal to the Foreign Investment Promotion Board to set up an airline in joint venture with Singapore Airlines. Then civil aviation minister Ghulam Nabi Azad refused to clear the proposal, having been criticised for allowing too many private airlines which were harming the state-run Indian Airlines.

However, when Jayanthi Natarajan was made minister of state for civil aviation, she sang a different tune saying the then Congress government had no objection to allowing the Tatas to set up an airline as long as certain criteria were met. But before any decision could be taken, the Congress government was defeated at the hustings.

It was during the United Front government that the entire episode took a political hue, dividing the country's ruling coalition. Then civil aviation minister C M Ibrahim simply refused to heed the proposal, claiming it would harm the national interest. On the other hand, then finance and industry ministers P Chidambaram and Murasoli Maran supported the project and were keen that it be cleared at the earliest.

However, with the Left parties reportedly dead against the joint venture, Ibrahim was able to have his way and the project was scuttled.

As per the aviation policy unveiled by the United Front government, no private airline joint venture would be permitted in the domestic sector if it involved a partnership with a foreign airline or an airport authority. This effectively scuttled Singapore Airlines's chances of a joint venture. Explaining the rationale for the policy, then aviation secretary Yogesh Chandra had stated, "Suppose a firm ties up with China Airlines and then there is a war. Will that not go against the national interest?"

However, the Tatas grew hopeful when the Bharatiya Janata Party and its allies formed the new government earlier this year. Civil Aviation Minister Ananth Kumar promised a new aviation policy which would encourage private participation in the aviation sector. However, no mention was made of allowing foreign airlines or airport authority.

There were rumours then that Ibrahim was acting at the behest of certain private airlines who feared for their survival should the mighty Tatas compete with them. When private airlines (called air taxi operators in official parlance) were allowed under the economic liberalisation policies of Narasimha Rao, there was a rush into the aviation sector in the early 1990s.

However, the extreme competition and lack of sufficient passengers proved too expensive for the flegdling ATOs. Within a few years, most of the ATOs -- East West, Damania, NEPC, Raj - were forced to down their shutters as their low-load factor and high costs proved unviable. Today, only two major ATOs remain, Jet Airways and Sahara Airlines.

Meanwhile, according to news reports, East West Airlines is hoping to fly again. Price Waterhouse, the international consultancy firm, has conducted a viability study and based on future air traffic operations, has opined that East West, once seen as a competitor to Indian Airlines, could be successful in the air again.

East West Director Faisal Wahid has said that it was waiting for the Tatas to begin operation as that would once more revive the aviation sector. He said the sector was bound to grow and there would be room for everyone.

East West has received clearance to acquire five aircraft to begin operation, though Price Waterhouse has suggested that the ATO keep at least seven or eight to break even.

Incidentally, the aviation ministry had appointed a committee to examine the possibility of reviving the various private airlines that had shut down. The panel has submitted its report to the ministry.

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