FIPB all-clear for Tata-SIA takeoff
Oct 24 2013 , New Delhi
JV needs DGCA’s NOC, permit for air services to launch flights
Singapore Airlines had sought permission to invest $49 million in the venture. Tata Sons, the holding company of the Tata group, would be the other partner. The Tatas would hold the majority stake with an initial investment of $51 million. The new venture would be christened Tata SIA Airlines.
Spokespersons of both the Tatas and Singapore Airlines welcomed the FIPB decision. The corporate affairs ministry had cleared the proposal last week.
The partners would now move the civil aviation ministry and the directorate-general of civil aviation (DGCA) for a no-objection certificate and air services permission before they launch their flights.
Tata-SIA planes would carry both passengers and freight apart from offering support services like operation or airport flying facilities, radio beacons, flying control centres and radar stations.
In February the Tatas had announced a partnership with Malaysia’s AirAsia for a low-cost carrier in India. Arun Bhatia’s Telestra Tradeplace is the third partner in the three-way joint venture. FIPB approved this venture in April.
“We are yet to formally hear from FIPB. We are delighted with the reports of approval,” a Tata spokesman said. Singapore Airlines vice-president for public affairs Nicholas Ionides echoed similar sentiments.
The proposal was to have been taken up last week, but FIPB postponed it till Thursday. Aviation consultancy Capa said it appeared to be all-clear for the new venture.
“It is a very important milestone for Indian aviation and credit to the government for being decisive and clear in its thinking,” said Kapil Kaul, South Asia chief executive for Capa. “We expect them to get the airline licence within six months and the no-objection certificate by January. All in order for this game-changing JV,” Kaul added.
Amber Dubey, partner and head of aerospace and defence at KPMG, said, “This (news) sends out very positive signals to the global investor community. If they play it well, Tata-SIA has the potential to be among the top three airlines in India by 2015. What is needed is the immediate abolition of the discriminatory 5/20 rule that will allow all Indian carriers to operate on international routes. Right now the international traffic from India is completely dominated by foreign carriers.”
“The Tata-SIA deal is in compliance with all necessary requirements. There is clarity on the deal unlike in the case of Jet-Etihad, where the contour of arrangements was not clear. Therefore, the kind of hurdles that deal faced are unlikely in this (Tata-SIA) case,” an analyst said.
Peeyush Naidu, senior director of Deloitte Touche Tohmatsu India, said, “The recent developments in terms of progressive approvals to the entry of such new players suggest operationalising of the proposed venture in the near term, pending certain required approvals from the civil aviation ministry and DGCA.”
Dhiraj Mathur, executive director of PwC India, said, “In the long run I expect the partnership (Tata–SIA) to add depth and breadth to the sector in India.”
The Tatas and Singapore Airlines have already set up an initial three-member board. The Tatas have two members and Singapore Airlines the third on the board. Prasad Menon, nominated by Tata Sons, is the chairman of the joint venture.
“It is Tata Sons’ evaluation that civil aviation in India offers sustainable growth potential. We now have the opportunity to launch a world-class full-service airline in India. We are delighted that we are partnering in this endeavour with the world renowned Singapore Airlines,” Menon had said last month.
At the time Singapore Airlines CEO Goh Choon Phong had said: “We have always been a strong believer in the growth potential of India’s aviation sector and are excited about the opportunity to partner Tata Sons in contributing to the future expansion of the market.”
This is the third bid of the Tatas and Singapore Airlines to enter the Indian civil aviation market jointly. In 2000, they had to abandon an attempt to buy 40 per cent stake in Air India after political resistance and intense corporate rivalries.
An earlier attempt of the two companies to start a carrier in India with 40 per cent equity contribution by Singapore Airlines had also been called off.
(With inputs from Soumonty Kanungo)