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Business News/ Companies / News/  Singapore Airlines—third time lucky?
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Singapore Airlines—third time lucky?

Two failures and 18 years on, Singapore Airlines is taking another crack at a market seen as potentially lucrative

Earlier this year, Singapore Airlines sold its stake in Virgin Atlantic to Delta Air Lines Inc. and decided to turn its attention to expanding its market share in the Asia Pacific. Photo: Reuters (Reuters)Premium
Earlier this year, Singapore Airlines sold its stake in Virgin Atlantic to Delta Air Lines Inc. and decided to turn its attention to expanding its market share in the Asia Pacific. Photo: Reuters
(Reuters)

Singapore: After an 18-year wait to move into India’s aviation sector and two failures that must have caused deep soul-searching, Singapore Airlines (SIA) is taking another crack at a market seen as a potentially lucrative one for South-East Asia’s largest airline.

SIA, which launched flights to India in 1970, attempted to gain a foothold in India after the government of then Prime Minister P.V. Narasimha Rao in 1992 introduced an open sky policy. This led to entrepreneurs like Pervez Damania of Damania Airlines, Takiyuddin Wahid of East West Airlines and Naresh Goyal of Jet Airways winning permits to launch airlines.

SIA teamed up with the Tata group, but the 2,000 crore proposal failed to take wing even after it was cleared by the Foreign Investment Promotion Board in 1997. Lobbying by other private operators and state-owned Air India has often been cited as the main reason why the plan fell through. In 2001, the two had to abandon a proposal to jointly buy a stake in Air India.

In 2010, then Tata Sons chairman Ratan Tata hinted that he had to abandon plans to launch an airline because he refused to pay bribes to secure the necessary approvals.

“I happened to be on a flight once; a fellow industrialist sitting on the seat next to me said, ‘You know, I don’t understand, you people are very stupid. You know the minister wants 15 crore. Why don’t you just pay, you want the airlines.’ I said, you will never understand this; I just want to go to bed at night knowing I haven’t got the airline by paying for it," Ratan Tata said in a speech.

At the time that SIA and the Tatas submitted the first proposal, the aviation ministry was headed by C.M. Ibrahim, who was against allowing international airlines to invest in the domestic space in India. But Jet Airways already had Kuwait Airways and Gulf Air owning a 20% stake each in it.

Reports suggested that P. Chidambaram, who was finance minister then as well, and industry minister Murasoli Maran favoured the Tata–SIA joint venture, but eventually the cabinet of then Prime Minister H.D. Deve Gowda endorsed Ibrahim’s position, and gave Jet Airways time to buy back the stakes from its foreign partners.

The initial failure did not prevent Singapore Airlines from tying up with the Tatas again and the duo launched a bid to buy a 40% stake in Air India This plan too ended in failure.

Singapore Airlines opted out of the race citing political opposition, and said it was “surprised by the intensity of opposition to the privatization of Air India from various quarters, including certain sections of political groups, trade unions and the media". “In such an adverse climate, SIA is not confident that it can play a useful and effective role," the company had said.

Its withdrawal came despite the fact that the joint venture was the sole bidder left in the fray after all other competitors for buying Air India had either pulled out or had been disallowed on security grounds.

External factors, too, played their part in the JV’s failure to pick up the 40% stake in Air India. The global economy was facing a slowdown and SIA was also more inclined to invest in Australia than in India. Its shareholders, too, were not too keen on buying into loss-making Air India.

Eventually, the Indian government decided not to privatize the flag carrier.

What has prompted Singapore Airlines to make another attempt at trying to break into the Indian market so many years later?

The loosening of foreign investment rules in India’s aviation sector will be an obvious answer, but it may not be the whole story.

More than one million Indian tourists are expected to visit Singapore this year. Singapore also has half-a-million Indians, including the diaspora and those on work permits. At the same time, India’s domestic sector also offers a huge business opportunity and is perhaps among the last of the large growth markets globally that is yet to be fully tapped.

Last year, a report by Centre for Aviation and air transport IT specialist SITA had forecast that India’s aviation market could increase to 452 million a year by 2020 to become the world’s third largest.

Earlier this year, Singapore Airlines sold its stake in Virgin Atlantic to Delta Air Lines Inc. and decided to turn its attention to expanding its market share in the Asia Pacific. This strategy also saw it investing in Virgin Australia Holdings Ltd as well as increasing flights on many sectors in this region.

It also launched Scoot, a low-cost, long-distance carrier last year in an attempt to tap customers who never fly its flagship carrier, and also owns one-third of budget carrier Tiger. SIA’s subsidiary Silk Air is also expanding its fleet and destinations across the region.

Singapore Airlines chief executive officer Goh Choon Phong told investors at 2012-end that the firm was “very open" to investment opportunities in both China and India in addition to South-East Asia.

The other half of the picture is that the firm wants to widen its portfolio as it is facing severe competition, in markets where it has been traditionally strong, from Middle Eastern airlines such as Emirates and neighbourhood full service airlines such as Garuda Indonesia and Malaysia Airlines.

It is here that India fits in: With Delhi, Mumbai, Bangalore and Hyderabad all boasting of world class airports, SIA can use this infrastructure to make India a second hub for flights to Europe as it attempts to negate some of the advantages of Gulf-based carriers, as well as to take on the likes of Malaysia Airlines and Cathay Pacific on these routes.

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Published: 04 Oct 2013, 12:19 AM IST
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