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Business News/ Politics / Policy/  Objections by existing airlines won’t block new entrants: ministry
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Objections by existing airlines won’t block new entrants: ministry

Tata JVs with AirAsia, Singapore Airlines have been facing opposition from FIA and its members

The Federation of Indian Airlines (FIA) has been arguing that India’s recently relaxed FDI norms didn’t apply to new airlines. Photo: MintPremium
The Federation of Indian Airlines (FIA) has been arguing that India’s recently relaxed FDI norms didn’t apply to new airlines. Photo: Mint

Hyderabad: The aviation ministry on Wednesday said it would not stop any airline from starting operations in the country based on objections by existing airlines, clearing away one potential risk to the launch of two new Tata group airlines.

“The ministry is acting on well laid down policies. The policies are clear and it cannot act based on individual interpretations," aviation secretary Ashok Lavasa said.

The Federation of Indian Airlines (FIA), with IndiGo, Jet Airways (India) Ltd, SpiceJet Ltd and GoAir as active members, has been aggressively lobbying against the entry of the Tata group airlines, arguing that India’s recently relaxed foreign investment norms didn’t apply to new airlines.

Tata Sons Ltd teamed up with Singapore Airlines Ltd (SIA) to launch a full-service airline in India and with Malaysia’s AirAsia Bhd for a low-fare airline after the government in September 2012 allowed foreign airlines to own as much as 49% in local airlines. FIA’s objections are targeted at the Tata-AirAsia deal, and not so much at the group’s tie-up with Singapore Airlines, as it’s the low-fare airlines that dominate India’s aviation market with a combined 80% share.

Both the Tata group airlines are awaiting final clearances.

“There are certain procedures for issuing a permit. We cannot say when it will happen," Lavasa said.

Last week, the Delhi high court issued notices to the government, the Foreign Investment Promotion Board (FIPB) and AirAsia on a plea filed by FIA against the approval accorded to the deal between Tata Sons and AirAsia.

In a letter dated 7 March to Prime Minister Manmohan Singh, FIA argued that the foreign direct investment (FDI) policy approved by the cabinet permitting foreign airlines to invest in airlines in India applied only to operating or existing airlines and not to new entrants with new international partners.

“The rationale for the FDI policy change approved by the cabinet was the financial state of the airlines in India, having accumulated huge losses and their inability to raise capital or finance from investors and financial institutions. It was, therefore, clearly for existing operating airlines," FIA’s associate director Ujjwal Dey wrote in the letter, which Mint has reviewed.

Last month, when the Directorate General of Civil Aviation (DGCA) sought comments from stakeholders on granting AirAsia India an air operator’s permit, FIA and its member airline InterGlobe Aviation Pvt. Ltd, that runs IndiGo, had made similar observations.

The aviation regulator rejected those observations and comments.

In its letter to the Prime Minister, FIA alleged that the DGCA’s rejection of its observations were based on findings that lacked credible examination. “The conclusions reached by DGCA are substantially if not totally incorrect," it said.

Industry experts see FIA’s lobbying as protectionist.

“This is crony capitalism of the worst kind," said aviation entrepreneur G.R. Gopinath, who recently bid for a national airline permit. Gopinath founded India’s first low-fare airline Air Deccan, which was run by Deccan Aviation Pvt. Ltd, when Indian aviation was dominated by Jet Airways, Air Sahara (later bought by Jet Airways) and state-run Air India. “Jet Airways had started the airline 25 years ago with 49% FDI from Kuwait Airlines and Gulf Airways," he pointed out. He also noted that the new FDI policy had allowed Abu Dhabi’s Etihad Airways PJSC to invest 2,060 crore in Jet for a 24% stake.

Gopinath said the government should make rules with a long term vision to make the aviation sector vibrant so that it benefits the country and expands the consumer base, and not make rules to protect any airlines. Bharat Mahadevan, who until recently was regional manager for north-east Asia at Jet Airways, said FIA is just going through the motions and the Tata-AirAsia deal would face no regulatory hurdle.

“The only thing FIA can ride on is that all the airlines are bleeding money so they can’t take any extra capacity, but that won’t really hold with the government. It’s a free market," he said.

On 21 February, Tony Fernandes, group CEO at AirAsia, said he has never sought to stop an airline from entering a market in his 12 years in the aviation business. “I have never ever tried to stop an airline. I was shocked to see an airline such as IndiGo involved in this. The only way to win is to beat me in better product and price. Not through protection and courts," he said. “Let the consumer decide."

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Published: 12 Mar 2014, 06:01 PM IST
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