rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Did Naresh Goyal scupper the Tatas?

Did Naresh Goyal scupper the Tatas?

November 24, 2018 09:09 IST

For debt-laden Jet Airways, bitter foe Tata may turn into timely saviour.
Surajeet Das Gupta reports.

Naresh Goyal, who founded Jet Airways

It has always been an acrimonious relationship.

While the Tatas have never publicly named him, most industry watchers say that it is an open secret that Naresh Goyal, founder-CEO of Jet Airways, lobbied hard to scupper the Tata group's aviation ambitions several times -- an allegation Goyal has always denied.

Hence, for Goyal it is something of a twist of fate that none other than Tata and its joint venture partner Singapore Airlines may together take over the troubled Jet Airways.

The problems between Goyal and the Tata Group is ancient.

Back in the early 1990s, when P V Narasimha Rao was prime minister, he met his Singaporean counterpart, Goh Chok Tong, and the idea of Singapore Airlines setting up a joint venture airline in India was floated.

Rao was told that SIA would be comfortable partnering with big boys like the Tatas.

Amar Nath Verma -- the prime minister's principal secretary -- took the proposal to Ratan Tata and received a positive response.

 

By 1995 the modalities of the proposed airline had been worked out. It was decided that the airline would have a fleet of 16 aircraft, the Tatas would be the minority partner with a 40 per cent stake, and the rest would be with SIA.

A crack team of senior executives led by S Ramakrishna, then in Tata Industries, and senior Singapore Airlines executives, was set up to facilitate the process.

The two partners did not anticipate any roadblocks. After all, the government had already allowed joint ventures in airlines -- Kuwait Airlines and Gulf Air held a combined stake of 40 per cent in Jet Airways.

However, it turned out that the proposal was vigorously opposed by the country's fledging private airlines, especially by Jet.

These airlines, including Damania and East-West, had been allowed in 1994 to operate scheduled airlines in the private sector for the first time.

Goyal and the others figured that a Tata-SIA airline with financial muscle and a big fleet would be tough to compete with. Those in the know say that it is here that Goyal showed his lobbying mettle. Fortunately for him, in 1996 there was a change in the political establishment.

The United Front government under H D Deva Gowda came into power at the Centre and the new civil aviation minister C M Ibrahim decided that no foreign investment would be allowed in aviation.

The Tatas made desperate moves to save the day by offering to dilute SIA's stake in the joint venture airline to 50 per cent and then to 40 per cent. But it was to no avail.

The government was unmoved and the Tata group's dream to set up an airline was killed by a hastily drawn-up policy which, most analysts agree, was aimed at protecting domestic carriers, especially Jet Airways.

Of course, this was not the only time that Jet tried to put a spanner in the works for the Tatas.

In 2001, when the National Democratic Alliance government under Atal Bihari Vajpayee decided to divest a 40 per cent stake in Air India, it was keen that the Tatas should participate.

The group was more than willing and partnered with Singapore Airlines in its bid to pick up a stake in Air India.

But there was huge opposition to this plan. Many analysts say Jet played an important role in drumming up support against the divestment plan by lobbying with politicians like Sharad Pawar and Praful Patel who were reportedly close to him.

According to insiders, as many as 40 members of Parliament wrote letters opposing the Air India divestment and senior leaders across party lines, as well as a parliamentary standing committee, questioned the government's decision.

Some senior politicians even wrote to the prime minister as to why Jet Airways was not being allowed to also bid (The reason, of course, was that if it also had Air India, it would lead to cartelisation.)

Matters came to a head when a letter, purportedly written by a top government official in the prime minister's office opposing the sale, began doing the rounds.

The consequence was that the only other bidder for the airline in the fray, the Hindujas, decided to withdraw. And Singapore Airlines pulled out of the partnership and so did the Tatas.

It was not until 2014 that the Tata group finally had its way.

The launch of a joint venture low cost carrier with Air Asia was followed up in 2015 by the launch of Vistara with its traditional partner, SIA.

While questions were still raised on the interpretations of the FDI policy which now allowed up to a 49 per cent stake for foreign carriers, the two deals did go through. Thanks to its financial worries, Jet itself was scouting for foreign investment which came with Etihad picking up a 24 per cent stake in the airline.

Today, the industry scenario has changed. IndiGo has replaced Jet as the new king of the Indian skies.

The Tatas again got into a slugfest with rival carriers on the 5/20 rule under which a carrier could not fly abroad until it had 20 aircraft and flew for 5 years in the domestic skies.

The Modi government was looking to scrap this rule altogether, but rival domestic carriers through their body Federation of Indian Airlines Association opposed the move.

And while Jet was part of the association, it was SpiceJet boss Ajay Singh who took on the Tatas.

The government gave in, and while the five-year clause was removed, the 20-plane condition was retained.

This time, an already beleaguered Goyal refrained from leading the charge.

Surajeet Das Gupta
Source: