New Delhi, Sept. 19: The Tatas have filed an application to float an airline with Singapore Airlines, resurrecting a plan they had been forced to abandon over a decade ago amid talk of corporate skulduggery and backroom politics.
The Tatas will hold a 51 per cent stake in the full-service carrier and Singapore Airlines the rest. The airline will be set up with an initial investment of $100 million (over Rs 610 crore), which will be shared by the partners in proportion to their ownership.
The name of the airline has not been decided but it could carry the Tata tag. Based in New Delhi, the airline initially will have three members on its board: chairman Prasad Menon and Mukund Rajan, both from the Tata group, and Mak Swee Wah, who will represent Singapore Airlines.
Menon is a former MD of Tata Power while Rajan is the Tata group’s chief ethics officer.
“We now have the opportunity to launch a world-class full-service airline in India,” Menon said. “We are delighted we are partnering the world-renowned Singapore Airlines.”
Details of the airline’s branding, management team and products and services will be announced in due course, the two partners said.
This is the second airline the Tatas are looking to float within a space of six months. Back in February, soon after the government permitted foreign direct investment of 49 per cent in civil aviation, the Tatas had teamed up with Tony Fernandes of Malaysia’s AirAsia to float a budget airline in India.
Approvals for Air Asia came through in March and it is poised to launch its services shortly.
The Tatas own a 30 per cent stake in Air Asia India and veto rights on the board but they do not run the airline. They also have a tiny sliver of equity — 1.84 per cent — in Kalanithi Maran’s SpiceJet.
A spokesperson for Tata Sons said Air Asia was fully aware of the joint venture and did not have any objection to the new partnership.
Civil aviation minister Ajit Singh said the Tatas had informed him this morning that they would be applying for an approval from the Foreign Investment Promotion Board (FIPB). “We have to wait for the FIPB’s response on the new venture,” Singh added.
The minister clarified that aviation rules do not bar companies from starting two airlines. However, the pact will require approvals from market regulator Sebi and the corporate affairs ministry.
The Tatas will have full operational control over the new full-service airline that will be hoping to fill the void created by debt-laden Kingfisher Airlines which was forced to halt services last year.
“Tata Sons will fully participate in the management and operations of the airline… we would like to ensure that we are able to realise the original vision of launching a full-service, world-class airline that India can be proud of,” said Rajan.
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.”
In 1995, the Tatas and Singapore International Airlines had applied for permission for a domestic airline in which each would hold a 40 per cent stake. The proposal had involved an investment of Rs 2,800 crore and plans to induct 88 planes, which would have made it the biggest airline in India at that time.
That plan came apart in April 1997 when the then civil aviation minister C.M. Ibrahim piloted a civil aviation policy in the dying days of the H.D. Deve Gowda regime that barred foreign airlines from investing in a domestic airline. The absurd policy had been in place until September last year when the government finally lifted the restriction.
The Tatas had tried to bid for Air India along with Singapore Airlines when the domestic carrier was put on the block in 2001. But that plan fell apart as well because of the rule barring foreign airlines from investing in a local carrier. Later, Air India was taken off the block.
In 2010, Ratan Tata had said he had grounded plans to float a domestic airline because of a suggestion by a fellow industrialist to pay a bribe of Rs 15 crore to a minister to secure approvals. Tata had said he told the industrialist: “I just want to go to bed at night knowing that I haven’t got the airline by paying for it.”
The new full-services airline will be locked in a dogfight with Naresh Goyal’s Jet Airways, which currently has a market share of 17.1 per cent, according to the latest statistics of the Directorate General of Civil Aviation (DGCA). Jet has a budget airline called JetLite – carved out of the old Sahara Airlines – which has a 5.1 per cent market share.
India has a very low number of domestic airline seats per capita at just 0.07. It compares poorly against Australia (3.35), the US (2.49) Canada (1.38) and Japan (1.5).
“Greater competition in civil aviation in India will foster benefits for the passenger in terms of greater choice in fares and services,” the Tata Sons statement said.
But there is a little rumble on the road ahead.
BJP leader Subramanian Swamy has filed a petition in Delhi High Court challenging the approval granted to the Air Asia venture and demanding that it be cancelled. The court has asked the government to file its response and clarify its civil aviation policy within four weeks.