Tatas to start full fare carriers with Singapore Airlines soon

Tatas to start full fare carriers with Singapore Airlines soon

The Tata group has inked a deal with Singapore Airlines to run a full-fledged carrier service. The group’s second success in the aviation sector comes within six months of joining hands with Malaysian operator Air Asia.

Unlike Air Asia India, the Tatas will control the new airline, with a majority stake of 51 per cent. Initially, a board will be set up with three members, two nominated by Tata Sons and one by Singapore Airlines. Prasad Menon, nominated by Tata Sons, will be the chairman. The Tatas are a minority stakeholder in the low-cost Air Asia India, with a 30 per cent stake and no operational role.

The new airline, which is yet to be named, is likely to start operations next year. Air Asia India is planning a launch in December or early January.

Though there is no official confirmation, the initial investment is said to be around $100 million. The airline will be based out of New Delhi.

The deal comes at a time when the airlines industry is recovering from rupee depreciation and increase in price of air turbine fuel. Experts said new operators will give a fresh impetus to the sector.

“This was long overdue and should have started 15 years ago,” Kapil Kaul of Centre for Asia Pacific Aviation told Deccan Herald. He, however, warned that regulatory uncertainties continue to be the biggest risk and the Tatas need to bring more clarity on their airline investments.

After signing a Memorandum of Understanding, the Tatas and Singapore Airlines have applied for the Foreign Investment Promotion Board’s approval to establish a new airline, which will “help to further stimulate demand for air travel.”

“It is Tata Sons’ evaluation that civil aviation in India offers sustainable growth potential,” Menon said.

Singapore Airlines CEO Goh Choon Phong 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. We are confident that the joint venture airline will help to stimulate market demand and provide economic benefits to India.”

The Tatas’ full-fledged entry into the sector follows two aborted moves in 1995 and 2001, when it tried to bid for 40 per cent stake in Air India after it was put up for disinvestment.
Tata Sons and Singapore Airlines withdrew from the bid in December 2001.

The disinvestment plan was shelved by the government due to political opposition.

Bribe

Ratan Tata had remarked three years ago that Tata Sons’ attempt to enter the aviation sector could not go further because he refused to bribe a Union minister.

Singapore Airlines’ entry into the Indian aviation space follows the government’s move to allow overseas operators hold up to 49 per cent stake in local airlines.

Civil Aviation Minister Ajit Singh said he came to know about the joint venture on Thursday.

“I was just informed this morning through a courtesy call by the Tatas, I cannot comment any further. The application will have to take its due procedural course,” he said.

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