If anyone had doubts about Cyrus Mistry’s audacity, Wednesday’s reentry into the airline business is evidence of steel he packs beneath the smile. The sector is bleeding, fuel remains frightfully overtaxed, bilateral traffic rights still dispensed on ministerial whims, the directorate-general of civil aviation (DGCA) is nowhere close to reforms proposed in the Naresh Chandra report, aero-politics still enacted by a byzantine regime, Naresh Goyal of Jet Airways being a lead director.
 
So, here is a dummies’ guide on why the new Tata boss must be savouring what he has just accomplished.

Also read: Maharaja is dying. Someone, please get the Mantri to attend!
 
The group has coveted a re-entry into airline business for decades. Sixty years back, in 1953, JRD Tata was tersely told by minister Jagjivan Ram that Air India, an airline JRD founded as Tata Airline in 1932, which had become Air India in 1946 as a joint venture between him and the government, stands nationalised.
 
Tata’s letters to Jawaharlal Nehru, since released, betray the hurt in no uncertain terms.
 
Somewhat remorseful, Nehru, and later Indira Gandhi, allowed JRD to chair the airline for 25 more years. But in 1978, prime minister Morarji Desai wasted little time in bumping JRD off and appointing a former IAF chief in his place.
 
In 1986, Rajiv Gandhi tried to restore some of that hurt. JRD’s nephew, Ratan Tata, was invited to chair Air India, just as Rahul Bajaj was asked to steer Indian Airlines. The experiment didn’t get very far, as did a tenure given to former Tata strongman Russi Mody as joint chairman of the two airlines. Of course, Mody was no favourite of Ratan Tata, but in his eventual resignation, prime minister Narasimha Rao. Mody stood checkmated by the newly minted Rajiv Gandhi Bhawan, the headquarters of the civil aviation ministry. In the bargain, Mody lost his access not just to Rao but also to the all-powerful principal secretary to the PM, AN Verma.
 
As the tussle of Mody and Yogesh Chandra, then secretary of civil aviation, played out for those of us who were aviation correspondents at that time, Rao’s interest in heralding an option finer than state-owned Air India and Indian Airlines involved another near miss for the House of Tata.
 
On a visit to Singapore, Rao and Verma told minister mentor Lee Kuan Yew and prime minister Goh Chok Tong that they must have Singapore Airlines to partner Indian Airlines and their engineering company as partners in the India story. The vehicle chosen was a little-known subsidiary of Indian Airlines called Alliance Air and the idea was to start from a clean slate without unionised pilots bullying the Rajiv Gandhi Bhawan.
 
Singapore was delighted, just as Rao was impatient. India’s Air Corporations Act, 1953 was a legal hurdle but Verma was determined not to let it prevent the two PMs. The Act was duly repealed and private airlines were allowed into what was until then a legislated monopoly of the state. By then, Ratan Tata had met Singapore Airlines boss CK Cheong a few times and Cheong was all too keen to take off with the Tatas instead. But they misjudged the power that Goyal wielded. It so transpired that Goyal had convinced the government that not only must his company given an airline licence, it should also be allowed to capitalise 40 percent foreign equity with Gulf Air and Kuwait Air. With the Act allowing private carriers, and Goyal already having 40 percent FDI, Tata and Cheong saw no reason why the PM won’t be able to grant them a licence on similar terms.
 
So, Karamjit Singh, a Singapore Airline corporate affairs veteran, was placed in New Delhi to see through the licence and an application made before the foreign investment promotion board (FIPB). To cut a long story short, Karamjit Singh was parked in Delhi’s Taj Mansingh hotel for over six years before it became apparent that Goyal could nix the combined will of Tata and the Indian PM! As a footnote in aviation history, I was in the lift of Rajiv Gandhi Bhawan when Singh was trooping in with the Tata-Singapore proposal. Several years later, I bid him farewell at the Taj a few hours before he was packing up, returning empty handed to Singapore, the Tata-SIA file shredded by a regulation anchored by Goyal wherein foreign airlines were no longer allowed.
 
To add insult to injury, disinvestment of equity shares in Air India, announced by Pradeep Baijal and Arun Shourie, had been nixed too. It never felt more ironical to have written both page 1 stories, one a foundation stone, another the epitaph.
 
So, the scale of what Mistry has achieved is evident from the fact that the closest Ratan Tata got to aviation in all these years has been a foray into helicopters and high-technology, one of them with Finmeccanica, the infamous Italian giant.
 
Yet, to be fair to JRD and Ratan Tata and how they stood checkmated by the system, Mistry’s alignment of stars has been more benign. Closer to his accession as Tata Sons chairman, in September 2012, India finally (re)opened the 40 percent FDI window to foreign airlines, a plan cleared only to resuscitate Jet and Vijay Mallya’s Kingfisher Airlines.
 
Will the Tatas have the last laugh? Will their plan crafted over decades now ride on the shoulders of Tony Fernandes, an audacious child of a Goan father and a Kristang mother, who in 2001, at the age of 35, had charm and the nerve to buy the embattled AirAsia from Malaysian supremo Mahathir Mohammad for 1 ringgit?
 
The first-facts are Mistry positive. First, he gets a piece of the action, albeit with a minority stake of 30 percent, without having to deep dive on his own.

Next, in Fernandes, with a London School of Economics, Time Warner pedigree, Mistry has as a partner who not only has 49 percent, but one of the most astute airline minds on the planet.

Third, Fernandes already has one eye firmly on China, which as premier aviation advisory body CAPA has pointed out, is not open at this point to authorising new local carriers. But the joint plan, also involving steel baron Lakshmi Mittal’s son-in-law Arun Bhatia with 21 percent, is future ready.
 
Similar advantages accrue for AirAsia. As CAPA has stated in a detailed report 20 days back, the brand has struggled to gain traction here since it launched its first Indian route, Kuala Lumpur-Tiruchirappalli, in December 2008. That’s partly because of its inability to access local distribution networks. Travel agents and online travel agents (OTAs) still account for most bookings in India but Indian agents have not supported AirAsia as Indian agents do not use the fee-for-service model. AirAsia hasn’t worked with India’s largest OTAs due to the exclusivity of its partnership with Expedia. Having to rely on direct web sales and its Expedia joint venture has limited Fernandes’s ability to penetrate the Indian market; he entered nine since Tiruchirappalli was launched in late 2008 but has had to drop three of these markets because of unprofitability. Mumbai and Delhi were dropped from the AirAsia network in 2012 as part of a route rationalisation exercise. Deeper insight from a salt-to-software behemoth will prove useful in the years to come.

One note of caution. India has been the only market in Asia which has seen a decrease in AirAsia capacity over the last year. The AirAsia brand currently accounts for just about 10 percent of seat capacity in the India-Southeast Asia market, compared to about 14 percent one year ago, according to CAPA and Innovata data. AirAsia’s 19,000 weekly seats to and from India currently makes it the 12th largest foreign airline group in India – smaller than even its archrival Malaysia Airlines. Although it is the third largest aviation market in the Asia-Pacific region and one of the 10 largest markets in the world, India is now only the seventh largest non-home market for the AirAsia brand.

“Securing the right local partner could resolve many of the challenges AirAsia has faced in serving India from its home markets of Malaysia and Thailand. The potential long-term growth opportunities in India, particularly in Asia’s fourth largest domestic market, also continue to be of interest to Mr Fernandes. But the market remains very competitive, even after the suspension of services at Kingfisher, and unprofitable,” Kapil Kaul, CAPA CEO, said in the aforementioned report. Kaul must be nodding in approval with the choice that Fernandes eventually made. [Please see full CAPA report attached below.]

The next round belongs to Goyal. Battling as he is for Etihad to buy into his airline, the UAE carrier wanting control over the finance function and a higher number of board positions, can he nix the Mistry-Fernandes-Bhatia combine? Also, can Tata-AirAsia compete with Rahul Bhatia’s Indigo Airlines, the only profitable carrier in the Indian skies. All in all, Airbus Industrie is a certain gainer. From Jet, which is quite a Boeing fan, Bhatia and Fernandes are A320 aficionados. Fernandes has ordered 374 new ones in addition to 101 that he has already. Bhatia has 64 and 216 A320s are in global order books. Also, it’s a challenging time for aviation correspondents!