Rivals may be creating hurdles for AirAsia's new venture, but good sense will prevail as a low-cost airline will only benefit the common man, says Arun Bhatia, the third partner in the AirAsia-Tata joint venture. In an exclusive interview with ET, the Lutyens Delhi realtor who seems to be revelling in the fact that he now has two of the world's biggest businessmen -'super-samdhi' LN Mittal and Ratan Tata - on his side, says the airline will break even in two-three years. Edited excerpts:
Did this deal happen by chance or by design?
I guess this is a sector that we have been looking at for the past few years. My son (Aneesh) runs a company that makes precision parts for the aircraft industry and that is how we got into thinking about it. Then this opportunity came and we were very happy that we have such fabulous partners. It started with Tony (Fernandez) talking to my son (Amit) in London. My son and he are partners in a football club in London, Queens Park Rangers. He mentioned it to him. Then later on it transpired that the Tatas would join in and we thought if they join, we would be happy to join. Both my sons met Tony in Singapore and they decided to finally come together. We then had to wait for the Tata board to give its approval.
Since when have you been talking to Tony for this?
We decided to join in about six months ago. This was after the (new FDI) policy was announced, in September.
Did AirAsia and you ever plan to buy an existing airline in India?
There was no such plan. It was always a new venture. The Tatas had been talked about. We had also talked to the Tatas about it. We knew Tony had already talked to them.
When did you meet the Tatas first? Had you met Mr (Ratan) Tata before?
No, I had not. I met him only recently. Tony was the instrument, whether with the Tatas or with us, separately. But both knew that the other would be a party to it.
Were you surprised that the Tatas came in with a minority stake? Did the Tata's ever ask for a majority share?
Yes, absolutely. We were surprised. But I have no knowledge of the discussions between Tony and the Tatas. We were told that you can take this much percentage and we said fine. We are game for whatever percentage we got. We have a substantial percentage, which is very good.
In that case, it would seem that you are fronting for Tony because as per the policy, he cannot hold more than 49% stake in the new airline in India, and by inducting you he does not need to have a majority local partner. What would be your response to that assumption?
Why should I front for anybody? If I didn't have the money then it was a separate issue. But I have the money so why should I front. I have to make money. I am not making money for anybody else, that's not my business.
We chose Chennai because what we are looking for are sectors where flights are fewer in numbers, but the potential is big. Around Chennai there are so many such sectors. Also the airport taxes are very high in Delhi and Mumbai. We will initially start with Chennai and then we'll see what sanctions we can get from the ministry.
What is the larger vision and plan?
The plan is to expand as quickly as possible, but looking into what routes we can get and what passenger load we can get. The more we get, the more we will plough in. We will start with about three-four planes in the first year. Then we keep on expanding. One has to wait and see. See, you can plan a 100 fleet airline, but if the load is not there, there is no point planning.
You've got an FIPB clearance but that there has been opposition from the civil aviation ministry. Will it be easy for you to steer past the coming hurdles?
It's a challenge. Mr Ajit Singh (the civil aviation minister) is a very intelligent man and I am sure he'll do what he thinks right. What I heard on the TV is that he needs some clarification from the commerce ministry. The commerce ministry has already given a clarification and if more is required I am sure they will get. But if there are hurdles still, we will try our best to convince them that this is best for the country.
How long will it take you to breakeven?
I am not at liberty to tell you that. We are very positive though. Everybody's model is different. Kingfisher's model is different from Indigo. Indigo is making money, Kingfisher didn't. Every person has their own way of thinking and the way AirAsia has put out their model, I think we should do alright, start making money in 2-3 years.
http://articles.economictimes.indiatimes.com/2013-03-11/news/37623822_1_ratan-tata-airasia-tata-low-cost-airline
Did this deal happen by chance or by design?
I guess this is a sector that we have been looking at for the past few years. My son (Aneesh) runs a company that makes precision parts for the aircraft industry and that is how we got into thinking about it. Then this opportunity came and we were very happy that we have such fabulous partners. It started with Tony (Fernandez) talking to my son (Amit) in London. My son and he are partners in a football club in London, Queens Park Rangers. He mentioned it to him. Then later on it transpired that the Tatas would join in and we thought if they join, we would be happy to join. Both my sons met Tony in Singapore and they decided to finally come together. We then had to wait for the Tata board to give its approval.
Since when have you been talking to Tony for this?
We decided to join in about six months ago. This was after the (new FDI) policy was announced, in September.
Did AirAsia and you ever plan to buy an existing airline in India?
There was no such plan. It was always a new venture. The Tatas had been talked about. We had also talked to the Tatas about it. We knew Tony had already talked to them.
When did you meet the Tatas first? Had you met Mr (Ratan) Tata before?
No, I had not. I met him only recently. Tony was the instrument, whether with the Tatas or with us, separately. But both knew that the other would be a party to it.
Were you surprised that the Tatas came in with a minority stake? Did the Tata's ever ask for a majority share?
Yes, absolutely. We were surprised. But I have no knowledge of the discussions between Tony and the Tatas. We were told that you can take this much percentage and we said fine. We are game for whatever percentage we got. We have a substantial percentage, which is very good.
In that case, it would seem that you are fronting for Tony because as per the policy, he cannot hold more than 49% stake in the new airline in India, and by inducting you he does not need to have a majority local partner. What would be your response to that assumption?
Why should I front for anybody? If I didn't have the money then it was a separate issue. But I have the money so why should I front. I have to make money. I am not making money for anybody else, that's not my business.
We chose Chennai because what we are looking for are sectors where flights are fewer in numbers, but the potential is big. Around Chennai there are so many such sectors. Also the airport taxes are very high in Delhi and Mumbai. We will initially start with Chennai and then we'll see what sanctions we can get from the ministry.
What is the larger vision and plan?
The plan is to expand as quickly as possible, but looking into what routes we can get and what passenger load we can get. The more we get, the more we will plough in. We will start with about three-four planes in the first year. Then we keep on expanding. One has to wait and see. See, you can plan a 100 fleet airline, but if the load is not there, there is no point planning.
You've got an FIPB clearance but that there has been opposition from the civil aviation ministry. Will it be easy for you to steer past the coming hurdles?
It's a challenge. Mr Ajit Singh (the civil aviation minister) is a very intelligent man and I am sure he'll do what he thinks right. What I heard on the TV is that he needs some clarification from the commerce ministry. The commerce ministry has already given a clarification and if more is required I am sure they will get. But if there are hurdles still, we will try our best to convince them that this is best for the country.
How long will it take you to breakeven?
I am not at liberty to tell you that. We are very positive though. Everybody's model is different. Kingfisher's model is different from Indigo. Indigo is making money, Kingfisher didn't. Every person has their own way of thinking and the way AirAsia has put out their model, I think we should do alright, start making money in 2-3 years.
http://articles.economictimes.indiatimes.com/2013-03-11/news/37623822_1_ratan-tata-airasia-tata-low-cost-airline
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