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The Foreign Investment Promotion Board (FIPB) on Thursday cleared a proposal by Tata-Singapore Airlines (SIA) to start a full service airline in India.
Economic Affairs Secretary Arvind Mayaram said the proposal was cleared without any riders. Now, Tata-SIA would have to secure security clearance from the home ministry, as well as an approval from the civil aviation ministry, along with an air operator’s permit from the Directorate General of Civil Aviation.
On September 19, Tata Sons had tied up with SIA to launch Tata SIA Airlines Ltd, a full service carrier in India, at an initial investment of $100 million.
On Thursday, Ratan Tata, former chairman of Tata group, met Finance Minister P Chidambaram, after the government cleared the proposal.
With a stake of 51 per cent, the Tatas would be the driving force in the joint venture. Singapore Airlines would have minority representation on the board, and “will not be in a position to have ‘de-facto’ control over the board”, the two companies had stated in their proposal to FIPB. The joint venture company would be incorporated in New Delhi, with India being its principal place of business. The airline has chosen Delhi as its operational hub, owing to capacity constraints at the Mumbai airport.
The board of Tata SIA Airlines would eventually have six directors, Tata Sons and Singapore Airlines said in an application to FIPB on October 17.
Mukund Rajan, one of the directors in the company, said the airline would start operations sometimes next year, subject to clearances. The project teams from both the shareholders are already working on the business plan and the number of planes they would require. However, the final contours would depend on whether the government scraps the rule under which domestic carriers have operate for five years before flying abroad. If the rule is changed, so would the company’s business plan, including the number of aircraft required.
In a statement, the Tata group said, “The Tata Sons-Singapore Airlines airline will begin with domestic services. Its business plan incorporates international services, as and when permitted. The features of aircraft and services will be announced in due course.”
Amber Dubey, partner and head (aerospace and defence), KPMG, said, “This 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 sive/20 rule, which would allow all Indian carriers to operate on international routes. Right now, the long-haul international traffic from India is completely dominated by foreign carriers.”
