A good partner and untapped potential in the low-cost sector made Tatas re-enter the aviation space although the industry remains tough, and the competition cut-throat, according to a company official.
“If you look at the low-cost carrier space, it is huge and it has not been adequately tapped. So, the opportunity is there,” Tata Group Brand Custodian and Spokesperson Mukund Rajan told PTI, when asked what made the group change its stand on re-entering the sector.
There are many people from many cities wanting to travel but are not receiving the services, and that offers immense potential, he said.
The Tata group, which pioneered civil aviation in India, is making a come-back to the sector with Malaysian low-cost carrier AirAsia and Telestra Tradeplace of Arun Bhatia in a 49:30:21 joint venture ‘AirAsia India’, a no-frills airline.
Last December, Ratan Tata, in an interview to PTI, had said he was unlikely to venture into the airline industry because of “destructive competition” in the sector. “It is a different sector today than it was at that time. It is somewhat like telecom. It is proliferated by many operators, some of them in financial trouble. I would hesitate to go into the sector today in the sense that the chances are that you would have a great deal of competition which would be unhealthy.”
The decision to re-enter the market apparently stems from the fact that partner AirAsia, the largest low-cost operator in the continent, has a proven track record.
Mr. Rajan said: “It is a great business proposition where we have a partner who has succeeded in other parts of the world and has done extremely well in pretty demanding market environment.
“It does not take (us) away from the other point Mr. Ratan Tata has made... Broadly speaking, aviation is tough industry and there are lots of people who have lost (money).”
He, however, did not respond to a question as to whether the group was considering a full-service carrier in future.
AirAsia India has filed an application with the Aviation Ministry seeking permission to launch its operations. It has plans to launch operations with a few aircraft and proposes to bring in 37 planes in five years.
