Photo: Bloomberg
Photo: Bloomberg

Tata-SIA to pursue outsourced strategy

Tata-SIA ties up with Air India, which will manage ground-handling and engineering services for the new airline

New Delhi: Tata-SIA Airlines Ltd, the joint venture (JV) between Tata Sons Ltd and Singapore Airlines Ltd, is pursuing an outsourcing model for its operations in India and has tied up with state-owned Air India Ltd to execute parts of the strategy before its expected takeoff in October.

Air India will manage ground-handling and engineering services for Tata-SIA, said two executives at the national airline who spoke on condition of anonymity.

“Their ground-handling and engineering checks will be done by us. For the big checks, they already have an MRO (maintenance, repair and overhaul facility) in Singapore," one of the officials said.

The outsourcing strategy adopted by Tata-SIA sets a sort of precedent in India, where most airlines have their own staff to perform engineering checks on their fleet and for ground-handling functions. Airlines have even taken the government to court in the past for forcing them to hire external ground handlers.

Air India Engineering Services Ltd, a subsidiary of the national airline, will provide engineering services to Tata-SIA. Staff of Air India SATS Airport Service Pvt. Ltd are expected to perform ground-handling duties for the airline at major airports; Air India Air Transport Services Ltd will look after ground handling at non-metro airports. A Tata-SIA duty manager will oversee the ground handling.

“Our goal is to provide our customers with the finest flying experience of a full-service carrier," a TATA-SIA spokesperson said in an emailed response to queries from Mint, without sharing any specific details on the operational model it would follow in India.

All three groups have links going back decades. Air India was started by J.R.D. Tata in 1932 as Tata Airlines, which was renamed Air India and then nationalized in 1953. Air India helped SIA in its early years. The Tata group and SIA are making their third attempt to start operations in India in a JV, having been thwarted twice in the past by political and corporate intrigue.

In the new start-up entailing an initial investment of $100 million, Tata Sons, the holding company of the $109 billion Tata group, has a 51% stake and Singapore Airlines the remainder.

The airline, which is awaiting a licence from the aviation regulator, plans to connect several metro cities on its network and will be a full-service airline—the first such in India since liquor baron Vijay Mallya’s Kingfisher Airlines Ltd took to the skies in May 2005; Kingfisher Airlines was grounded in October 2012 under the weight of accumulated losses and heavy debt.

Tata-SIA plans to have a fleet of 20 planes initially, with the first of them expected to land in India in September.

The civil aviation ministry, meanwhile, has sought a progress report from the Directorate General of Civil Aviation (DGCA) on the grant of a licence to Tata-SIA.

A government official who declined to be named said the airline’s operational manuals were found to be based on a format that’s followed in Singapore, adding that Tata-SIA had been asked to redraft them as per Indian aircraft rules.

Tata-SIA’s outsourcing model is a smart way to get off the ground fast, said Steve Forte, the New York-based former chief executive of Jet Airways (India) Ltd.

“There are many pros with outsourcing such as negotiating costs and soliciting bids from different players; not investing in infrastructure; not having to look for and hire specialized people; not getting involved in labour contracts, and so on," he said.

To be sure, there are cons, including the risk of diluting the product’s image and lesser say on quality control.

“In the case of Tata-SIA, I think it is a smart move that allows the airline to start operations much sooner than if they did everything themselves. It is a good way to start," Forte said.

The new airline, which plans to take off in the festival month of October with Airbus A320 planes, is set to announce its brand name in the capital on Monday.

The airline has hired brand consulting company Ray+Keshavan for the exercise. Bangalore-based Ray+Keshavan also designed the Infosys brand.

A brand analyst said expectations from the new start-up were very high.

“Airlines have not been very courageous in making a statement with the brand name... Tiger (Airways) is one example (of an exception), otherwise names are all based on the place of origin," said Kiran Khalap, co-founder of Chlorophyll, a brand and communications consultancy, “They have an opportunity to really break the conventional rules and have a totally lateral brand name. In today’s day and Internet age, people know who is behind them, so they don’t have to call it Tata-SIA."

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