NEWS:
The Directorate General of Civil Aviation (DGCA) has granted an Air Operator’s Permit (AOP) to AirAsia, paving the way for the airline to launch lowcost services in the country. AirAsia India, a joint venture among Malaysia’s AirAsia Berhad, Tata Sons and Telestra Tradeplace, is to launch services from its Chennai hub with three Airbus A320 aircraft. Chief Executive Mittu Chandilya said his team was finalising flight schedules. Though the DGCA rules will require AirAsia to have a fleet of five aircraft within a year of starting operations, the airline plans to have 10 planes by that time. Chandilya said AirAsia’s fares would be 30 per cent lower than rivals. “We will be competing with the railways and not other airlines.”

VIEWS:
If there is any area in which the Indian bureaucracy has maintained remarkable consistency, it is in the excruciatingly tardy pace at which projects related to new ventures in areas of economic activity are processed. And the civil aviation industry is no exception. The joint venture project AirAsia India was initiated on February 20, 2013, and the date for the launch was set for December 2013. The proposal was cleared by the Foreign Investment Promotion Board in just 14 days time, a record of sorts indeed! However, the no objection certificate from the Civil Aviation Ministry could be obtained only six months later on September 20. Thereafter, the promoters approached DGCA for AOP. But there were a number of roadblocks ahead.

But what is somewhat intriguing is that it has taken 15 months for the airline to obtain AOP. This tardy approach by the bureaucracy, apart from being both inexplicable and unacceptable, is afflicting the venture despite the fact that it is patronised by the Tatas, the doyen of the private sector, pioneer in civil aviation and capable of influencing the decision-making process of the Central Government.

The first impediment was the interpretation of the newly introduced regulations on Foreign Direct Investment (FDI) by foreign airlines in Indian carriers which was limited to 49 per cent. The argument against the proposal for the joint venture AirAsia India was that FDI by a foreign carrier was meant only for existing airlines and not for new ventures. The Federation of Indian Airlines (FIA) filed an appeal in the Delhi High Court against the grant of permit to AirAsia India in response to which the Court issued notice to the government. The Secretary, Ministry of Civil Aviation, Ashok Lavasa took a stand stating that the government would not respond on the basis of individual interpretations and hold back the launch of AirAsia India merely on account of opposition from rivals which was only to be expected.

In the meantime, the DGCA constituted a three-member committee to look into the issues related to the new joint venture airlines. While on their recommendations the government overruled objections to the establishment of AirAsia India, the problem was not solved as a fresh petition was filed by BJP leader Subramanian Swamy. Queries from some quarters about the ownership and effective control was also set aside by the committee observing that “Such ventures were necessary for a large country like India as there was imperative need for encouraging existing airlines as well as allowing new entrants for optimum availability of services and improved connectivity at affordable tariffs”. The committee observed that it was “necessary to bring operational efficiency and expertise in the existing airlines to ease their financial hardship which could only be achieved through enhanced competition and improved work culture, attributes that can be provided by new entrants”.

While grant of AOP to the budding venture is exciting news not only for the Malaysian carrier but also for the travelling public who can look forward to qualitative change in the lowcost services in terms of standards and affordable fares. But it is premature to celebrate as the entrepreneur is yet to negotiate a legal hurdle. The grant of AOP at this point in time is conditional as it is subject to the decision of the Court on the petition by Swamy. The hearing is on July 11, 2014.

If the decision of the Delhi High Court is unfavourable, the government may well approach the Supreme Court. Meanwhile, Swamy and the FIA are planning to move the Delhi High Court against the grant of AOP. As the legal system in India is not particularly known for speedy resolution of cases, this case too may drag on and hence the precise date of launch remains somewhat uncertain. However, optimism prevails as AirAsia is going ahead with the preparatory work for the launch. AirAsia is inspired by the support it has received from the government and expects a favourable ruling by the Court. Soon after the AOP was granted, AirAsia Chief Tony Fernandes, tweeted, “History has been made today in aviation. Everything has been hard for AirAsia but we never give up”.

Entry of AirAsia India will definitely intensify competition in the domestic aviation market wherein the airlines have been struggling to survive. News of entry of AirAsia India as also of Tata–SIA would have certainly driven a chill up the collective spine of the Indian carriers who can no longer bask in the protective comfort behind artificially created firewalls!