Singapore Airlines' (SIA) long-running plan to establish a new domestic Indian airline in partnership with the TATA Group has cleared one major hurdle, with approval from India's Foreign Investment Promotion Board (FIPB). The deal could still be derailed by the country's civil-aviation ministry, however, which plans to ban foreign equity investment in Indian airlines.
The proposed $600 million joint venture has now been forwarded to the Indian prime minister's cabinet for final review and approval. Local sources suggest that a decision is expected before the end of January, almost two years after plans for the start-up carrier were first announced.
SIA has proposed taking a 40% stake in the new airline, the maximum now allowed under existing Indian legislation, with TATA holding the balance. SIA and TATA have met strong opposition from both the Indian airline industry and from factions within the Government, who fear "unfair competition" from the new airline. An FIPB ruling had been put on hold pending completion of a new national aviation policy, but following the transfer of the board from the prime minister's office to the industry ministry, it was decided not to wait any longer.
A deciding factor will be the cabinet's consideration of the new aviation policy now being drafted by the civil-aviation ministry. "The fundamental issue is whether it will embrace foreign investment," says an airline official, who warns that "-it could be one way they still try to block the deal". It is reported that the country's aviation minister, C M Ibrahim, has said that the new policy will permit "no foreign equity in domestic airlines". Observers warn that the joint venture is also likely to face opposition from some of the 13 parties that make up Prime minister H D Deve Gowda's coalition government.
This policy would also have major ramifications for India's largest and most successful existing private carrier, Jet Airways. Kuwait Airways and Gulf Air each hold a 20% stake in Jet, which recently ordered six Boeing 737-800s.
Plans originally called for the TATA airline to be operating up to 16 150-seat passenger jet airliners and a smaller number of 60- to 70-seat turboprops within four years of start-up.
Source: Flight International
