For Modi, Diplomacy Is the Easy Part

Operating in India for only a few months, Tony Fernandes, the Malaysian businessman who runs low-cost carrier AirAsia, has already gotten an education in the division of power between the central government and India’s 36 states and territories. With the world’s second-largest population and a growing middle-class traveling over a chronically crumbling road and rail network, India should be an easy place for AirAsia and other carriers to thrive. But the opposite is true, in part because of the high costs imposed by the states. Local politicians traditionally see air travel as a luxury for the rich, so the states have imposed some of the world’s heaviest taxes on aviation fuel, which is about 50 percent more costly than the global average. “The industry is taxed to death,” Fernandes says.