BITTER FOE TATA COULD PROVE SAVIOUR FOR JET

It has always been an acrimonious relationship. While the Tatas have never

publicly named him, most industry watchers say 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 would be something of an ironical twist of fate if none other than Tata and its joint venture partner Singapore Airlines together take over Jet. SURAJEET DAS GUPTA writes

The relationship between the Tatas and Naresh Goyal has always been acrimonious. While the Tatas have never named him publicly, most industry watchers say it is an open secret that Goyal, founder and Chief Executive Officer 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 would be something of an ironic twist of fate if none other than Tata and its joint venture partner Singapore Airlines (SIA) together take over Jet.

The problems between Goyal and the Tata group have spanned over two decades. Back in the early

1990s, when P V Narasimha Rao was Prime Minister, he met Goh Chok Tong, his Singaporean counterpart, following which the idea of SIA 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. The erstwhile Prime Minister’s principal secretary Amar Nath Verma 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, while the rest would be with SIA. A crack team of senior executives led by S Ramakrishna, then in Tata Industries, and senior SIA 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.

However, it turned out that the proposal was vigorously opposed by the country’s fledging private airlines — especially 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 large fleet would be tough to compete with. Those in the know say that it was here, when 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 to 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.

Of course, this was not the only time that Jet tried to throw 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 to see participation from the Tatas.

The group was more than willing, and partnered with SIA in its bid to pick up a stake in Air India. However, there was huge opposition to this plan.

Many analysts say that Goyal played an important role in drumming up support against the disinvestment 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 disinvestment and senior leaders across party lines, as well as a parliamentary standing committee, questioned the government’s decision.

Some politicians had also questioned the government on why Jet was not allowed to bid. Matters came to a head when a letter, purportedly written by a top government official 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.

SIA 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 foreign direct investment 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 once 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 five years in the domestic skies.

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

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.

It was not until 2014 that the Tata group finally fulfilled its aviation ambitions. 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