Tata SIA airline joint venture cleared by aviation ministry
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New Delhi: Tata Sons Ltd has been third time lucky in its quest to operate an airline in India ever since the flag carrier—Air India—the group started in 1932 was nationalized. On Wednesday, the civil aviation ministry cleared the Tata SIA Airlines Ltd project, the joint venture with Singapore Airlines Ltd (SIA), in what is the most important step in the process to take off.
“The proposal has been cleared today and there are no hitches now,” a top ministry official, who declined to be named, said on Wednesday.
Civil aviation minister Ajit Singh approved the proposal on Wednesday evening, a few days after the home ministry informed the aviation ministry that it had cleared the start-up’s board of directors.
Mint first reported on 25 March that the home ministry had cleared chairman Prasad Menon, a long-time Tata group executive; Tata Sons brand custodian and chief ethics officer Mukund Rajan; and SIA’s executive vice-president (commercial) Mak Swee Wah for Tata SIA Airlines.
The official orders for the no-objection certificate to start an airline will be sent to Tata SIA Airlines later in the week by the aviation ministry, the official quoted above said.
“We are thrilled,” said Sanjay Singh, a spokesperson for Tata SIA Airlines. “There is a lot of hard work that has gone on in the back-end. We are now going to apply to the DGCA (Directorate General of Civil Aviation) very soon.”
To start operations, Tata SIA needs a formal airline licence from DGCA, the industry regulator, based on the no-objection certificate from the aviation ministry.
This can take more than three months and is meant for the airline to showcase its technical capabilities such as staff, engineering set-up and aircraft to start the airline.
The airline is then registered as a scheduled airline in the country to conduct passenger operations.
AirAsia India—a joint venture between AirAsia Bhd, the Tata group and businessman Arun Bhatia—received security clearance in August and a no-objection certificate from the aviation ministry in September, but is yet to get a licence from DGCA.
Approvals for Tata SIA have come in record time so far.
On 24 November, SIA said it had received formal clearance to invest in the Indian airline from India’s Foreign Investment Promotion Board.
The airline then approached the home ministry for its approval on 13 January and the no-objection certificate was granted on 2 April.
Tata Sons, the holding company of the $109 billion Tata group, and SIA have proposed to start a full-service airline with $100 million in initial investment, with the Indian partner holding 51% and the city-state’s national airline the remainder.
The launch will mark the realization of an ambition that Tata Sons and SIA have together cherished for one-and-a-half decades, only to be thwarted twice.
In 2000, the two firms abandoned a joint attempt to buy a 40% stake in government-run Air India.
An earlier attempt by the two companies to start an Indian airline with 40% equity contribution by SIA was also aborted. In both the cases, political resistance and corporate rivalries were blamed.
For Tata group, the launch of operations will mark its return to an industry it pioneered in India with Tata Airlines in 1932, which was renamed Air India in 1946 and eventually nationalized by the government in 1953.
“This will be the first time ever in India that two entities like Tata and SIA, with such a strong financial base, would be commencing airline operations, making it more likely to be a success story. I think it’s a welcome move as it will bring in an efficient airline into the system,” said Manet Paes, formerly a senior executive with Air India and an independent aviation analyst.
“Granting the licence will benefit the consumer in the short term as capacity will be added and prices will come down. But unless the government takes steps for a viable industry, like reducing jet fuel taxes, the industry is not going to sustain in the long term and growth will be hampered,” Paes said.