FC businessman of the year
Dec 30 2013 , Mumbai
—― JM Barrie, The Little White Bird
The Tata name will be flying again, literally — emblazoned on the planes that the eponymous group will operate through two joint venture carriers. There is but one man who should take credit for this, and he is Ratan Naval Tata, 76, chairman emeritus of the Tata group.
For him, it will be a dream come true, and God alone knows he tried hard, very, very hard, putting in more than his fair share of grind and relentless fight to resume what J R D Tata was forced to give up decades ago — a Tata airline.
He is actually doubling the bet with two airlines, one in the low-cost flying space and the other a full-service carrier. In India the demarcation between the two is blurring, but the two companies promise to set the market ablaze with a marked differentiation that will suit the aam aadmi as well as the privileged soul, and everyone in between.
This is why the editors at Financial Chronicle decided to confer the title of ‘FC Businessman of the Year for 2013’ on Ratan Naval Tata for the second time in six years (he was first chosen for the honour in 2009). FC’s editors relied entirely on their native wisdom and a careful scrutiny of India’s corporate leaders and their achievements during the past 12 months.
Competing with Tata for the title this year were Rahul Bhatia of Indigo (India’s most successful aviation venture) and Team Cognizant (the company is slated to emerge as the second biggest Indian software enterprise ahead of Infosys in all four quarters of the calendar).
We chose Ratan Tata not because of the accomplishments of his $100 billion group of which he no longer is the boss, but for his singular enterprise of floating the aviation ventures and for the way he could shrug off the many setbacks in the past decade to get the Tata name flying again.
In choosing him as Businessman of the Year for 2013, we salute his individual acumen, a quality that FC was the first to look for in business leaders, other than their corporate achievements and their companies’ bottom lines.
FC recognised Malvinder Mohan Singh as its first Businessman of the Year in 2008 for selling Ranbaxy to Japanese drugmaker Daiichi in a path-defining deal. In 2009 Ratan Tata was a clear choice for successfully launching the Nano despite the setback he received in West Bengal and also for steering the Tata companies through the turmoil of the global financial meltdown.
In 2010 Mukesh Ambani was Businessman of the Year for keeping RIL’s flag as the biggest Indian company flying high at a time when there was corporate bloodbath all round and many corporate reputations turned to dust.
The year 2011 was an exception, as FC withheld the recognition of a Businessman of the Year for, after mapping the stories of 11 dynamic enterprises, we believed that no one deserved the honour that year. In 2012 Wockhardt chairman and group CEO Habil Fakhruddin Khorakiwala was chosen for the dramatic turnaround of his debt-ridden company. Wockhardt has been back in the news since then for all the wrong reasons.
Let’s get back to 2013 and Ratan Tata. On a breezy morning on July 2, when he flew AirAsia chief Tony Fernandes to New Delhi in a private jet, Tata was trying to rebuild a dream.
The flight was not as grand as the Karachi-Bombay flight his predecessor JRD, the former chairman of Air India, flew solo in 1962 to commemorate the 30th anniversary of Air India. But surely, July 2, 2013 marked a turning point for the distressed aviation sector in India.
“My new pilot, Ratan Tata, (is) flying me to Delhi. Another way AirAsia cuts costs. The advisor is a pilot,” Fernandes tweeted live on board the jet. Tata took him and AirAsia India chief Mittu Chandilya to meet civil aviation minister Ajit Singh to request him for speedy clearances for the low-cost aviation company.
After some initial hitches, the low-cost carrier, in which the Tatas are partnering Malaysia’s AirAsia and Arun Bhatia’s Telestra Tradeplace, is taking shape. Ratan Tata, who holds a pilot’s licence and often flies his group’s aircraft, is the chief advisor on the AirAsia India board.
“I think this is a different type of enterprise that Fernades is bringing and will hopefully spread the use of air travel across India and in a new dimension,” said Tata soon after the meeting with the minister. The airline plans to add 10 planes a year and will focus on operations at the country’s under-utilised airports instead of offering services to and from the main hubs of Mumbai and New Delhi.
The venture intends to make flying affordable for everyone and has secured permission to import 10 Airbus A320 planes in the first year of operation. The first flight will take off in February.
Close on the heels of the AirAsia joint venture came the announcement of the second carrier. After two unsuccessful attempts in the past decade to bring Singapore Airlines to India as a partner, the Tatas were third time lucky. Tata-SIA Airlines, the joint venture between the two, is now readying itself to launch full-service flights on domestic and international routes.
Unlike in the first carrier, Tata Sons is holding the majority 51 per cent stake in Tata-SIA; the Singapore carrier holds the remaining 49 per cent. As per information available with the corporate affairs ministry, the new company with a total paid-up capital of Rs 5 lakh and registered office in New Delhi has three directors, Prasad Menon, Kersi Rustom Bhagat and Mukund Govind Rajan. The foreign investment promotion board has already cleared a proposal for $49 million SIA investment. The Tatas are to put in $51 million initially.
Ratan Tata has gone about it in a determined way. “His passion for flying as a business has been a constant, never a flicker,” says R Gopalakrishnan, director of Tata Sons and a slew of group companies.
“He is a perfectionist. He does not brook incompetence… Apart from his well known passion for flying, maybe this attribute also played a role,” said Gopalakrishnan of the man’s aviation mission.
Fernandes, AirAsia’s founder and group CEO, has this to say about Rata Tata: “He is a fantastic guy. It is a fantastic experience working with him. One of the most successful businessmen in the world, he will help the management and board of (AirAsia India) to form a strategy for India in the coming years.” The airline will change the Indian aviation industry.
A little known factoid from Tata’s childhood has defined his lifetime journey. Tata says he never really had a guru or a mentor to drive his ambitions. But he did receive a small pearl of wisdom from his grandmother. “In whatever you do, my child,” his grandmother once told him, “let there be purity of purpose.”
Those words have been the leitmotif of his career ever since. Whether in driving Tata Motors to become the first truly Indian carmaker or in creating the Nano and now in launching two airlines, Tata has always been driven by purpose. There has always to be a rationale behind what he does.
As two new aviation joint ventures ready themselves, some questions arise. Was the 1953 nationalisation of the Tata airline a disaster? Can the broke Air India compete with the new Tata aviation companies? Will the government finally say goodbye to running Air India and privatise it?
A part of what is Air India today was once a Tata company. Tata Aviation Services, formed in 1932, in fact, had marked the beginning of civil aviation in India. In 1948, it became Air India and in 1953 the government took it over. Today, it is in a shambles, perpetually on a financial crutch offered by the government.
Ratan’s predecessor J R D Tata had been chairman of Air India for a long time. His solo Karachi-Bombay flight in 1962 to commemorate the 30th anniversary of Air India is part of Indian aviation’s folklore. At the age of 73 in 1982, JRD repeated the feat to mark the golden jubilee of Indian civil aviation. Before that, in 1978, he had been unceremoniously removed as chairman by the then prime minister Morarji Desai.
“The biggest moral and mental setback that I had ever suffered” was how JRD responded. “I felt like a parent who had lost his favourite child,” he said then.
In his book Beyond the Last Blue Mountain: A Life of JRD Tata, business historian Russy M Lala has described how ungrateful the government was towards JRD. “The demoralisation of Air India began with the dismissal of JRD. As the airline steadily declined in service, popularity and profitability, even a decade later it was evident that all this was due to the petty-minded folly of the government, and worse, the way it was done,” Lala wrote in his book.
Six decades down the line, JRD’s ‘favourite child’ is on the deathbed. Mismanagement and reckless fleet expansion forced by political bosses have left the airline gasping. Ratan Tata, who served as non-executive chairman of Air India in the 1980s, could do little. After he stepped out the airline went from bad to worse.
In 2009 when Praful Patel, the then civil aviation minister, approached him to head an advisory board to turn around Air
India, Ratan gently declined. But for him aviation remained a ‘nationalist’ call.
Ajit Singh, minister of civil aviation, is ‘happy’ to invite the two aviation companies to start operations. He told Financial Chronicle, “Tata-SIA is a good deal since Singapore Airlines is a much bigger airline with strong international presence. This will help in further enhancement of connectivity. Tata-SIA will create hubs and more connectivity. For AirAsia India, it will be a challenge to operate the Airbus A320 to smaller cities since traffic is limited. AirAsia India has said it will connect tier II and tier III cities but it is important for them to come up with the right strategy (to optimise the services).”
In a country where less than 1 per cent of the population flies, any new airline may feel challenged if the market doesn’t grow fast enough. “The per capita penetration in India is definitely much less than in China and many other countries. How can they do it and we cannot? They did it by using small aircraft like the 60-, 70- and 80-seaters. Now airlines are taking the cue and trying to use smaller aircraft to increase connectivity with non-metro cities,” the minister told FC.
Top group officials who worked closely with him do not think Tata will have a tough going in steering the two airlines. In strategy, leadership quality, commitment and in-depth knowledge of every sector the Tata group is in, there is no one to beat Ratan.
Ratan Tata is a man of fresh ideas and innovation. Says H M Nerurkar, MD of Tata Steel: “He personally appreciates engineers and scientists who show that fervour. His manner of working has been similar to the Japanese style of long-term strategic thinking. (As chairman) he would often ask questions about our preparations, competitors’ preparations and the development of the employees in sync with the requirement. He was the first to float the idea of globalisation long before the Corus deal happened. He believed that if India were to achieve significant growth, it would have to wrest opportunities globally. It was an idea that was later put to best use by others in the country.”
Nerurkar acknowledges that he has learnt a lot from Tata about dealing with competition and handling pressure. “He would take notes to prepare for any work at hand and his choice of words was perfect. He was full of courtesy and was respected for that. There are certain principles that he wanted all to stick to,” Nerurkar says.
Sanjay Ubale, a former IAS officer and now MD of Tata Realty and Infrastructure, says Tata’s humble and polite nature generates a lot of inspiration. “He is very humane and down to earth. His humility floors you.”
Ubale recounts an incident: there was as usual a queue for food in the office and Ratan Tata came and stood at the end, refusing exhortations to jump the queue and go in front. “He is extremely humble and made small little gestures we don’t expect from people of his stature. Once we sent him a lamp on his birthday. Two days later we got a thank you note from him,” Ubale remembers. He always saw the big picture. “This could be said about each and every decision he made in the group.”
R Mukundan, MD & CEO of Tata Chemicals, is another Tata veteran who has seen Ratan Tata from close quarters. “If Indian business is now seen with respect globally, it has a lot to do with the high standards of integrity and dignity with which Ratan Tata conducted himself. The focus on innovation and technology during his tenure led by TCS and Tata Motors brought global companies back to India as a place with tremendous potential and capability. His emphasis was on an integrated approach to development that included care for society, environment, health and safety along with profits,” says Mukundan.
“When I joined the group in the early ’90s, liberalisation had opened up the economy and the protection given to companies in terms of duties dropped overnight from 130 per cent to 20 per cent. Several companies came under tremendous pressure. It was Tata’s guidance that allowed us to stay focused and overcome the pressure. Growth happened only after we brought stability to the company and became competitive; we even started exporting. When we were looking at new technology for water purification, he was a pillar of support and his ideas helped us produce Swach, one of the most economical water purifiers,” Mukundan says.
Samir Yajnik, COO of Tata Technologies, says Ratan Tata manages with facts and leads with empathy. “I first met him in Singapore where we started the company. He was there for the launch (of the company) and motivated each one of us for setting up a world-class engineering firm which was to revolutionse the
way designing was done. His role in designing the Pune campus
along with Charles Correa is an example of his interest in our company, which is much smaller than other group companies.”
Yajnik recalls Tata’s visit to the Pune campus on his 70th birthday. He was to spend two hours but ended up spending the whole day there. “I asked him if this is how he spends his birthday; he replied, ‘I enjoy spending my birthday with my people.’ It is so contagious and incredible,” says Yajnik.
S Ramakrishnan, another group veteran and finance director of Tata Power, says Ratan Tata believes in a long-term vision and perspective. “He also believes in taking bold decisions. He likes to learn and honours his commitments.”
The Tatas’ re-entry in aviation is like revisiting history. According to Lala, JRD, at the helm of Tata Airlines then, had approached the government soon after Independence with a proposal to extend air services to foreign countries. The government response came in two weeks flat and Tata Airlines launched Air-India International on March 8, 1948.
Exactly three months later, India made its first international flight with Air-India’s Bombay-London service. India’s colours were borne by the Constellation plane named Malabar Princess, which took off from the Santa Cruz airport at 11:30 pm with 35 passengers, among them JRD himself. He carried with him messages of greeting and goodwill from prime minister Jawaharlal Nehru to the prime minister of Britain, the president of Switzerland and the prime minister of Egypt.
Air-India was not then the floundering airline it is now. It flew high, doubling operations within four years and posting profits every year until 1952. But by July 1953, ten other private airlines in India had piled up huge losses. On August 1, 1953 the government nationalised all airlines under the Air Corporations Act, created two state corporations, one to operate to neighbouring countries, and the other to run long-range international services. Air-India was merged with Indian Airlines and Air-India International, with JRD as chairman. Morarji Desai, then a minister in Nehru’s cabinet, invited JRD to be Air-India’s first chairman.
JRD had actually suggested that all the airlines be merged into two — one for the east and one for the west. But the government did not agree. He then suggested that there should be two airlines —domestic and international, just like BOAC and BA in the UK of those days. That’s how Indian Airlines and Air India were born. But in 2011, this was reversed and the two were merged to form Air India in its current shape.
With Ratan Tata’s advisory role in the two new Tata airlines shake up the aviation sector?
Amber Dubey, KPMG partner and head of aerospace and defence, thinks so. There will be more competition, more regional and international connectivity, better services and lower fares. He argues that the Tatas have joined hands with one of the best airlines in the world. It may also open the possibility of their entry into Star Alliance, a move sure to be resisted by some other Indian ‘legacy’ carriers.
“SIA’s biggest strength is in intercontinental long-haul flights.
Nearly 70 per cent of global traffic from India is westbound — to West Asia, Africa, the EU and the Americas, where SIA has limited play. Once Tata-SIA gets the permission to fly abroad, it can also compete on westbound routes. Delhi airport’s position as a global hub will get a boost with both Air India and Tata-SIA using it as a hub for long-haul flights. Since rules require any Indian carrier to operate in the domestic sector for five years before it can qualify to fly international, this opportunity is still some time away. But we expect this arbitrary and unilateral restriction to be abolished soon,” says Dubey.
Kapil Kaul, South Asia CEO of the Centre for Asia Pacific Aviation, agrees. “Tata-SIA will be game changing and have a big impact on the aviation sector. The impact in the domestic sector will be limited, initially, as they will take time to scale up and the full service model will address a different market segment.
“International plans will be the key but will depend on the abolition of five-year and 20 aircraft rule. The size or scale of its operations will determine the pressure on the existing market structure.” However, Kaul does not see an immediate impact; he also points to concerns over regulatory clearances, especially for Tata-SIA.
He foresees AirAsia India facing pressure on fares on some routes, depending on their network and scale of operation. It will take time for them to scale up. He believes there is nothing certain yet about AirAsia’s operations because of delays as it awaits final regulatory clearances.
The Indian aviation scene has not really lived up to its promise for a variety of reasons. The total number of seats offered by IndiGo, GoAir, SpiceJet and JetKonnect is 127,000 a day. These four airlines will collectively add 18 to 20 aircraft to their fleet over the next 12 months. According to analysts, the number of daily seats could rise by 15,000- 20,000 after the aircraft are acquired. AirAsia India will have to operate in this segment.
According to another industry expert, the arrival of Tata-SIA and AirAsia India is driven by FDI. Singapore Airlines could not have asked for a better partner than the Tatas, a group with deep and wide presence in hospitality and allied sectors.
SIA had watched India closely and may have wanted to wait and watch more, especially after its failed attempts in 1997 and 2001 to fly into India on Tata wings. Many in the industry believe that it is to the credit of Ratan Tata that despite the past failures he managed to convince SIA to make yet another attempt.
That said, aviation is Ratan Tata’s unfinished agenda. The onus to take the legacy forward is now on the present Tata group chairman, Cyrus Mistry, also an aviator.
(With inputs from Vikas Srivastav and Soumonty Kanungo in Mumbai)