FIPB okays Tata’s plan to start new airline with SIA

Written by ENS Economic Bureau | New Delhi | Published: October 25, 2013 3:32 am

The proposal by Tata Sons to start a full-service carrier in partnership with Singapore Airlines (SIA) has been cleared by the Foreign Investment Promotion Board (FIPB) on Thursday. The Tata group will have a 51 per cent stake in the venture and the equity base of the airline is pegged around Rs 600 crore.

Economic Affairs Secretary Arvind Mayaram said after the FIPB meeting that the Tata-SIA proposal has been cleared without any riders.

The joint venture secured the approval of the corporate affairs ministry last week. Post the FIPB nod,the airline company will have to apply to the civil aviation ministry for a ‘no-objection certificate’ and then to the Directorate General of Civil Aviation for Air Operators Permit.

With this proposal,the aviation sector in India has seen entry of a third foreign carrier bringing in equity investments of over Rs 2,800 crore. The other investments are the Rs 80 crore brought in by Malaysia’s AirAsia in AirAsia India and Rs 2,058 crore by Abu Dhabi’s Etihad for its 24 per cent stake in Jet Airways.

The Tata-SIA JV company has announced that it will operate a full-service carrier in India. The proposal did not face any hurdle at the FIPB,as it is learnt to have satisfied all requisite norms. “The proposal by Tata-SIA had fulfilled all norms under the existing foreign investment rules and did not face any trouble from any ministry,” said a senior civil aviation ministry.

In the proposal,the joint venture company has assured the government that control of the company would always remain in Indian hands. It has also said in the proposal that the Indian subsidiary of SIA will get access to SIA’s international network. The JV would also provide air transport carriers for both passengers and freights as well as supporting services to air transport,like operation or airport flying facilities.

This is the third attempt by Tatas and SIA to enter the Indian civil aviation sector. The two earlier failed attempts were starting a new airline and to buy stake in Air India.

A senior civil aviation ministry official said that the entry of Tatas into the sector will bring in best practices into the sector. “Tatas are globally known for their professionalism and we expect that they will bring in best practices into the sector. Above all,it will provide a great alternative to consumers,” the official said.

Analysts have also welcomed the entry of the airline and pushed for abolition of minimum eligibility criteria norm for Indian carriers to fly international.

“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. The long-haul international traffic from India now is completely dominated by foreign carriers,” said Amber Dubey,head – aerospace and defence at global consultancy KPMG.

The civil aviation ministry is internally discussing the proposal to abolish the minimum criteria of five years of domestic operations and a fleet of 20 aircraft for Indian carriers to fly abroad.

Tata,SIA chief call on FM

New Delhi: Ratan Tata,chairman emeritus,Tata Group and Goh Choon Phong,CEO,Singapore Airlines on Thursday called on finance minister P Chidambaram hours after the FIPB gave its approval to the Tata-SIA partnership.

“Very excited that the Tata-Singapore Airlines venture has got the clearance,” said Tata after the meeting. “A lot of work needs to be done from our end. The next step is to get a no-objection certificate for which we will apply to the aviation ministry shortly,” Tata added.

Singapore Airlines,a subsidiary of Temasek Holdings,is the world’s 10th-largest carrier with revenues of $14.8 billion in 2012 and a net income of $335 million.

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