Singapore Airlines looks set to become the first beneficiary of the latest twist in India's convoluted efforts to develop a coherent aviation policy. The country's new prime minister has directed the aviation ministry to abandon its two-month old ban on foreign ownership of domestic airlines, opening the door again to SIA's long-delayed plans to start a new carrier with Tata Industries.
However, Jet Airways is continuing with plans to find domestic investors to replace Gulf Air and Kuwait Airways as shareholders by the end of October, prompting suggestions that the carrier will seek a larger overseas partner instead, to enable it to compete more effectively against the SIA-Tata venture.
India's new prime minister, Inder Kumar Gujral, has ordered a review of aviation policy, with the onus on liberalisation to promote healthy competition, including a fresh look at the Tata-SIA proposal. 'I am totally dissatisfied with the aviation policy,' he has said. 'One cannot think of modernisation if the country's skies are not open.'
The director general of civil aviation has already drafted a new policy, under which foreign interests, including airlines, could own up to 40 per cent of domestic carriers. This would permit private Indian operators to operate international services, and specifies that the average age of their fleets should be below 10 years.
If adopted, this would allow SIA to take a 40 per cent stake in Tata's US$708 million domestic startup airline. It would also allow Kuwait Airways and Gulf Air to keep their 20 per cent stakes in Jet Airways, but Jet says it will not change its decision to abandon foreign equity.
Prime Minister Gujral strongly supported the Tata-SIA proposal in the previous cabinet. Since coming to power he has appointed a new junior transport minister, Jayanti Natarajan - a leading lawyer turned parliamentarian - and removed civil aviation secretary Yogesh Chandra, who played a key role along with aviation minister C M Ibrahim in securing the previous Gowda government's rejection of the joint venture proposal.
Ibrahim remains civil aviation minister, but analysts in New Delhi say that he has been 'effectively sidelined' and is outnumbered in the new cabinet. The finance and industry ministers opposed the earlier move to block foreign equity, and the prime minister has ordered the Foreign Office to prepare a detailed paper on the foreign policy advantages of favouring Tata-SIA.
However, there is still strong opposition from private carriers and some political factions. Pramod Mahajan, leader of the right-wing BJP, says: 'Such a step would be fatal to India's interests. Why doesn't Tata Group come out with its own scheme instead of roping in foreign partners?' The Communist Party of India, a member of the ruling United Front coalition, calls the proposal 'anti-national'.
R Prasad/T Ballantyne
Source: Airline Business
